TransUnion CIBIL Credit Market Indicator Launched to Chart Health of India’s Retail Lending Market

• Latest TransUnion CIBIL Credit Market Indicator (CMI) shows that India’s retail credit market is positioned for strong growth with resurgence in credit demand and supply
• Public Sector Banks have led the resurgence, with private sector banks and NBFCs also seeing a strong recovery in the recent period
• Outstanding balances and credit active consumers grew year-on-year (YoY) by 8% and 7% respectively in August 2021, despite the second wave of the pandemic
• Credit inquiries touched a record high during first week of November 2021 backed by festive demand
• CMI will help stakeholders make more informed decisions

Mumbai, November 11, 2021 – In order to provide India’s credit industry with a reliable and contemporary benchmark of retail lending health, TransUnion CIBIL today launched its unique Credit Market Indicator (CMI). The COVID-19 pandemic has caused volatility in overall credit market conditions and the CMI is a single monthly measure designed to give lenders and policymakers the information they need to make more informed decisions.

The latest CMI of 87 in August 2021 (up from 78 in February 2021) indicates the resiliency of India’s credit market, which is back on growth trajectory despite the impact of the second wave of the pandemic. The CMI is not a stationary index; hence the level in itself is not indicative of credit health. The CMI number needs to be looked at in relation to previous period(s) and not in isolation. A lower CMI number compared to the prior period represents a decline in relative credit health, while a higher number reflects an improvement.

As an integral partner to India’s financial ecosystem over the last two decades, TransUnion CIBIL has launched a number of initiatives and solutions* during the pandemic designed to help support the resurgence of India’s credit industry and the economy. The CMI complements these wider efforts and has been designed to help foster trust in the market by providing actionable research-based insights.

A powerful metric of India’s retail credit health for financial ecosystem stakeholders

The TransUnion CIBIL CMI is a country-specific measure of depersonalized and aggregated consumer credit health trends. It evaluates the impact of hundreds of reported credit variables and identifies those that are most significant to changes in consumer credit trends. Data elements are summarized on a monthly basis to analyze changes in credit health and are categorized under four pillars: demand, supply, consumer behavior and performance**. These are combined into a single, comprehensive indicator measure.

“The latest TransUnion CIBIL CMI shows that India’s retail credit market is poised for strong growth supported by a significant resurgence in credit demand as well as supply, despite the second wave of the pandemic. Inquiry volumes have increased by 54% between February 2021 and October 2021, as economic activity gained momentum. Outstanding balances and credit active consumers grew YoY by 8% and 7% respectively in August 2021. These insights are a testament to both government policy as well as the speed at which lenders in the market have adapted, with Public Sector Banks leading the resurgence in credit growth. Alongside an overall increase in consumer demand, we’ve also seen a corresponding increase in supply. Lenders have adapted quickly to the shift in new credit originations via digital channels, which has become the new normal in the pandemic environment. They’ve managed to do this whilst adapting strategies to ensure risk stays within acceptable limits,” explains Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL.

Chart 1: Monthly CMI of Indian Retail Lending Market Over the Last 5 Years

Source: TransUnion CIBIL consumer credit database.

1. When selecting certain variables, year-on-year (YoY) movements are analyzed to remove the effects of seasonality. The increase in April 2021 CMI was temporary and driven primarily by an exponential increase in inquiries and originations in April 2021 compared to a lower base of April 2020. Inquiry and origination volumes increased YoY by 8.5 times and 5.2 times respectively in April 2021.
2. August 2021 CMI value is provisional and subject to revision as additional data get reported to the TransUnion CIBIL credit bureau.

Strong credit growth indicators across demand and supply showcase resiliency

The CMI charts the relative health of India’s retail lending market through a number of significant economic and market changes. Slowing economic growth between 2016 and mid-2017 saw a sharp decline in the CMI as credit growth moderated and delinquencies increased marginally (marked as orange in chart 1). Through the end of 2017 and into 2018, stronger economic growth and entry of FinTech and other non-bank lenders—collectively known as non-banking financial companies (NBFCs)—created greater demand and supply in the market, and credit health improved (marked as blue in chart 1). As economic growth started to moderate in 2018 and into 2019 and beyond, the NBFC liquidity crisis reduced credit supply in the market and relative credit health recorded a moderate deterioration as a result (marked as light green in chart 1).

The CMI shows that the most pronounced impact on retail lending market health was in the first few months of the pandemic, but that overall, the market has become increasingly resilient as the pandemic has progressed (COVID-19 times marked in dark green in chart 1). Between February and May 2020, the CMI fell 17 points from 100 to 83.

The second wave of the pandemic had a significant impact on the nation as a whole, but the retail credit market was more resilient as lenders adjusted their business models and became better equipped to respond. In addition, central and state administrations focused on creating micro-containment zones, avoiding the need for a complete lockdown. This resulted in a less severe impact on economic and credit activity. The overall CMI returned to a positive trajectory and climbed nine points to 87 in August 2021 from its low earlier in the year. Inquiry volumes—a demand measure—increased by 20% between February 2021 and August 2021, compared to a decline of 31% seen during the same months last year. In the first week of November 2021, there was a record increase in the number of enquires on the TransUnion CIBIL consumer bureau indicating a marked resurgence in credit demand and economic activity in India.

When analyzed at a geographic level, for states where revival from COVID-19 cases was faster, there was also a corresponding improvement in credit health. For instance, the CMI for Maharashtra has increased YoY by 4 points in August 2021.In contrast, the CMI of Kerala has declined by -12 points during the same period.

Public Sector Banks lead the resurgence in retail credit growth

The TransUnion CIBIL CMI also charts the relative credit health of different lender categories during the pandemic: PSU (public), PVT (private), and NBFC. PSU lenders experienced less of a negative impact on CMI in the earlier stages of the pandemic because they were amongst the quickest to resume lending post the initial lockdown. This resulted in a faster recovery of credit growth for PSU lenders.

In contrast, because of both higher levels of delinquencies and slower recovery in supply—in part due to liquidity constraints—NBFC lenders saw less of a recovery after the first wave of the pandemic. However, in the most recent period both NBFC and PVT lenders have seen a sharp recovery in credit health, primarily because they have now adapted to successfully manage the conditions prevalent post the second wave.

Chart 2: Monthly CMI by Lender Category for Last 2 Years

Source: TransUnion CIBIL consumer credit database

Informed lending decisions key to recovery

Lenders can use the CMI in several valuable ways. It can help them assess the effectiveness of their current business strategies by leveraging market intelligence. It can also help them evaluate and understand the health of their portfolio and then benchmark their performance against industry peers and take remedial actions if required.

With global economic conditions remaining challenging, the shape and trajectory of a post-pandemic recovery will continue to be volatile. Having a clear perspective of overall credit market health, as well as individual consumer insights, will be the key to informed lending decisions. Recovering levels of demand and supply indicate continued resiliency, but close monitoring of emerging trends is essential.

“TransUnion CIBIL is committed to supporting our customers and stakeholders in the market with research-based insights for navigating business growth and driving sustainable financial inclusion. Based on our rich consumer dataset, we believe that the Credit Market Indicator is uniquely and efficiently positioned to measure the overall health of India’s retail lending market in a single metric, and provides a powerful tool for strategic business and policy decisions. With better and timely insights, lenders can build more robust strategies that can support consumers and ultimately fuel lending that will act as a catalyst for economic growth,” concludes Kumar.

* See CreditVision® New-to-Credit (NTC) Score and in partnership with MoSPI the MSME Credit Health Index

** The TransUnion CIBIL Credit Market Indicator (CMI) is an evolving model which is regularly reviewed to ensure the most relevant variables and their relative weighting are selected to best chart the credit health of India’s lending market. When selecting certain variables year-on-year movements are analyzed to remove the effects of seasonality.