Consumer Credit Growth Declines For The Sixth Straight Quarter: TransUnion CIBIL

Consumer credit growth has decelerated for the sixth consecutive quarter, with the demand for new home loans and auto loan turning sluggish.

According to TransUnion CIBIL’s ‘India Retail Credit Trends’ report, overall balances across all major consumer loan products increased by 13.1 percent in the third quarter of the current year, compared to 23.2 percent growth reported in the same quarter last year. With the exception of credit cards, all categories saw a slower pace of growth compared to a year ago.

• Credit card outstanding grew at 40.7 percent in Q3 CY19 compared to 31.7 percent in Q3 CY18.
• Personal loans grew at 28 percent compared to 33.5 percent in the same period last year.
• Outstanding auto loans grew at 10.3 percent in Q3 CY19 compared to 17.6 percent last year.
• Outstanding home loans grew at 10 percent in Q3 CY19 compared to 17.7 percent last year.
• Outstanding loans-against-property grew at 11.6 percent in Q3 CY19 compared to 24 percent last year.

He added that the consumer inquiry volumes for personal loans and credit cards increased significantly while inquires were unchanged or dropped slightly for loans against property and home loans.

This was reflected in the growth in new loans originated during the quarter.

New consumption driven loans, which includes personal loans and consumer loans, increased 24 percent in the third quarter. However, new asset backed loans, which includes auto loans, two-wheeler loans, LAP, home loans, declined by 8.4 percent over a year ago.

“The share of consumption products to total balances originated increased to 31.2 percent in Q3 2019, compared to 25.1 percent in Q3 2018,” the report said.

Credit Cards and Personal Loans

With banks seeing a slowdown across a number of categories, the focus on credit cards and personal loans has increased.

New credit cards issued rose by 20.9 percent to 3.91 million in Q3 CY19, compared to 2.61 million a year ago.

According to the report, lenders are targeting consumers in the age-group of 25 to 35 years and they now constitute 46.5 percent of all new credit cards issued. It added that credit card spending in semi-urban and rural areas grew by 50 percent over the year, which reflects increased distribution of these products.

Similarly, as lenders focus on providing unsecured, low-value loans and consumers delay their expenditure on large assets like vehicles and cards, new personal loans given out saw a surge of 133.9 percent to 7.28 million in Q3 CY19 compared to 2.61 million a year ago.

CIBIL says this was mainly driven by non-banking companies as they distributed around 5.3 million loans of all personal loans in Q3 CY19. Around 78 percent of these loans were in the form of micro loans, up to Rs 25,000, reflecting the shift towards smaller value unsecured loans.

The report also says that the proportion of new-to-credit customers in credit cards dropped to 18.6 percent in Q3 CY19 compared to 26.2 percent in Q3 CY18. While new-to-credit consumers in personal loan originations decreased to 16.5 percent in Q3 CY19 compared to 17.3 percent in Q3 CY18. This essentially suggests increased disbursals to existing customers.

Asset-Back Loans

There has been a decline in new auto loans across all lenders and overall origination volumes declined by a marginal 1 percent in Q3 CY19. The report says that this decline in origination was due to a fall in passenger vehicle sales which has continued to impact auto loan growth.

The report highlighted that auto loans provided to consumers in the below-prime risk segment (those with a CIBIL score of 730 or less) has been growing since last year. In the third quarter of the current year, 30.5 percent of all new auto loans went to this segment.

Home loans, which make up around 50 percent of the total consumer credit portfolio, saw new approvals decline by 12.9 percent year-on-year. This deceleration in home-loans has taken place as buyers are putting off their home purchase decisions because they lack confidence, the report said.

New loans-against-property grew marginally at 1.2 percent in Q3 CY19, with private banks approving more such loans while other lenders pulled back.

“Credit growth in loans against property (LAP) has been limited due to lower credit off-take in self-employed segment who largely avail LAP for their business or capital expenditure needs,” the report said. Further, it added the number of new-to-credit customers receiving loans-against-property declined to 15.2 percent in Q3 CY19 from 23.3 percent a year ago.

Delinquencies

Delinquencies, based on the quantum of loans that are over 90 days past due, in credit cards rose by 10 basis points over the past year to 1.95 percent at the end of September 2019. Whereas in personal loans, delinquencies improved by 5 basis points to 0.58 percent during the same period.

Delinquency rates in auto loans reduced by 22 basis points to 3.09 percent in Q3 CY19.

For home loans, delinquencies increased by 13 basis points to 1.82 percent in Q3 CY19. While public sector banks saw a 24 basis point fall in delinquency rates in Q3 CY19, housing finance companies saw a 49 basis points increase.

Delinquencies in the loans-against-property segment increased by 52 basis points to 3.75 percent in Q3 CY19. Delinquency rates for public and private banks remained stable, but NBFCs witnessed a 59 basis point rise in delinquencies during the past year, the report said.