Synopsis : India's retail credit market saw a sharp moderation in Q4 FY25, with new loan originations rising just 5% YoY. Demand dipped notably among younger borrowers, while lenders leaned towards high-ticket, asset-backed loans.
India’s retail lending landscape entered a cautious phase in the final quarter of FY25, as credit growth softened significantly. According to TransUnion CIBIL’s June 2025 Credit Market Report, new loan originations grew only 5% year-over-year in March 2025—less than half the 12% growth seen a year ago. This marks a clear cooling in retail credit appetite across consumer segments, despite the Reserve Bank of India's 25 basis point repo rate cut to 6.25% in February.
The decline was most noticeable among younger borrowers. Consumers aged 35 or below contributed just 56% of all loan enquiries in Q4 FY25, down from 58% the previous year. This age group, which comprises a large portion of New-to-Credit (NTC) consumers, showed weakening demand—reflected in both falling enquiry volumes and lower lender engagement.
Bhavesh Jain, MD & CEO of TransUnion CIBIL, noted that "the easing in demand for consumption loans, typically favored by younger borrowers, mirrors the broader slowdown in credit appetite." Indeed, while volumes dipped, loan values rose—indicating a growing preference among lenders for high-value credit. Loans such as home and two-wheeler finance backed by high-value assets are gaining traction.
Home loans above ?1 crore surged 9% YoY in Q4 FY25, even as the overall home loan segment contracted by 7%. This shift hints at a strategic tilt by lenders toward borrowers with stronger profiles and asset backing.
Interestingly, while urban and metro regions showed declining credit enquiry volumes—dropping to 48% from 51%—rural and semi-urban areas displayed resilience, growing to 52% from 49% in the same period. This divergence suggests that tier-2 and tier-3 cities may be buffering the nationwide slowdown in credit demand.
However, not all news is grim. The report highlighted a noticeable improvement in credit performance. Credit card delinquencies (90+ days past due) eased to 2% in March 2025 from 2.04% in December 2024. Likewise, personal loan delinquencies dropped to 1.14%—the first quarter-on-quarter improvement in a year.
TransUnion CIBIL’s Credit Market Indicator (CMI) fell to a two-year low of 97, underlining the cautious stance of both borrowers and lenders. Yet, the rise in high-ticket secured loans and improving repayment behavior may indicate a shift towards more responsible, quality-driven borrowing.
Disclaimer : This article is for informational purposes only and does not constitute financial advice. Please consult a certified financial advisor before making any credit or investment decisions.
