Synopsis: According to a recent report from TransUnion CIBIL, India’s credit culture has shown signs of improvement, with a rise in prime-rated borrowers despite moderate retail credit growth. The share of prime borrowers—those with a credit score above 731—rose to 55% in June 2024 from 51% in June 2022.
India’s credit culture is strengthening, as the share of prime-rated individual borrowers has risen, according to a new report by TransUnion CIBIL.
Despite a tightening of credit supply and moderate retail credit growth, the data indicates positive trends in creditworthiness, signaling an overall improvement in the country’s lending ecosystem.
The share of borrowers with credit scores above 731, categorized as prime and above, has increased to 55% in June 2024 from 51% in June 2022.
On the other hand, the share of subprime borrowers—those with scores between 300 and 681—has slightly decreased from 22% to 21% over the same period.
This upward shift in credit scores highlights a growing trend of responsible borrowing and credit management among Indian consumers.
Self-monitoring among borrowers has also seen a significant rise, increasing by over 50% in FY 2023-24, according to TransUnion CIBIL’s report.
This indicates that individuals are paying closer attention to their financial health and credit performance, contributing to the overall improvement in credit culture.
However, despite the rise in prime-rated borrowers, retail credit growth has slowed down, particularly in the quarter ending June 2024.
Banks and NBFCs have tightened the supply of credit, especially for consumption-driven products such as credit cards, personal loans, and consumer durable loans.
This is largely due to cautious lending approaches following timely regulatory guidance and the relatively high credit-deposit ratio.
The report noted that growth has moderated across all credit products. Small-ticket loans, in particular, saw the sharpest decline.
Home loans contracted by 9% in the June quarter of 2024, compared to a 4% contraction in the same period in 2023.
Credit cards experienced a 30% contraction, compared to just 8% in June 2023.
Personal loan growth also slowed dramatically, rising only 3% in 2024 compared to 36% growth in the previous year.
Rajesh Kumar, Managing Director and CEO of TransUnion CIBIL, explained the trend: “Timely regulatory guidance and the relatively high credit-deposit ratio are contributing to the moderation in retail credit growth.”
First-time borrowers, known as New-to-Credit (NTC) consumers, have also seen a steady decline in originations over the last five years.
Their share dropped from 16% in the quarter ending June 2023 to 12% in June 2024, highlighting a more cautious lending environment for new borrowers.
The Credit Market Indicator (CMI), a comprehensive measure used to analyze changes in credit market health, stood at 101 in June 2024—the same as in June 2023. Since June 2022, the indicator has consistently remained above 100, signaling healthy retail lending trends despite the tightening credit conditions.
In conclusion, TransUnion CIBIL’s report provides a mixed picture of India’s credit market. On one hand, the rise in prime-rated borrowers signals a strengthening credit culture and more responsible borrowing practices.
On the other hand, moderate retail credit growth and a tightening of lending, especially for consumption-driven products, reflect a cautious approach by banks and NBFCs.
The next phase of India’s credit growth will depend on how regulatory guidance and market conditions shape the lending landscape in the coming years.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Readers are encouraged to consult a qualified financial advisor before making any investment or borrowing decisions.
