An ICICI Bank Ltd. branch stands in Ooty, Tamil Nadu. (Photographer: Dhiraj Singh/Bloomberg)

India Now Has 100 Million Active Retail Borrowers, Shows TransUnion CIBIL Data

The number of active retail lending accounts crossed the 100 million mark for the first time in the April-June 2018 quarter, shows data released by credit bureau TransUnion CIBIL on Monday.

The increase in retail borrowers comes against the backdrop of a push from banks and non-bank lenders to grow their retail lending books at a time when corporate lending has been slow. These entities have not just tried to increase the amount of lending to existing customers but have also continued to grow their pool of borrowers.

This has reflected in increase in new accounts. The rate of origination of new accounts had risen by 30 percent year-on-year at the end of the first quarter in 2018, showed the report.

India is currently in the midst of a structural transformation from a savings-focused and debt-averse country to a consumption-focused leveraged economy. This transformation is due to multiple factors: demographics, urbanization, rising digitalization and consequent rise of e-commerce, improved access to retail lending, enhanced exposure to the world and within India and resultant emulation effect.  
TransUnion CIBIL Report

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The aggregate balance of all retail lending products increased by 27.3 percent over the past year to Rs 27.9 lakh crore as of June 2018. The increase was a result of a 26.2 percent year-over-year increase in total account volumes, accompanied by a small 0.9 percent growth in average balance per account.

Average ticket sizes of loans have fallen this year as banks and non-banking finance companies (NBFCs) have added more customers in the credit card, personal loan and consumer durable loan businesses. Typically, these unsecured loan accounts have smaller loan balances as compared with larger retail lending products like housing loans and auto loans, the report said.

As per TransUnion-CIBIL’s estimates, the share of unsecured retail loan products had risen to 74.4 percent of volume of new loan origination in the January-March 2018 period, as compared with 73.4 percent a year ago and 65.3 percent in January-March 2016.

Demographic Profile

While younger customers, in the 20-29 age group formed about 19 percent of the population that had accessed retail lending products, their share to total loan balances was much lower at 8 percent.

According to TransUnion CIBIL, this was due to a combination of factors. These customers are still at the beginning of their careers and thus have lower income, which limits their ability to borrow large sums of money. They also depend on low value, high volume products like credit cards, personal loans and consumer durable loans, rather than large ticket loans such as housing and auto loans.

Customers within the 20-49 age group constituted a majority of customers who access retail loans in India.

Customers aged between 20-49 form the bulk of the market in terms of volumes as well as value and are likely to be the biggest growth drivers of the industry. This is the segment that is likely to witness the fiercest battle for market share by lenders.  
TransUnion CIBIL Report

From a geographic perspective, the retail lending industry continues to be driven primarily by the urban areas.

“This is amply clear from the fact that the top three states in terms of retail lending – Maharashtra, Tamil Nadu and Karnataka – account for nearly 40 percent of aggregate balances as well as 32 percent of the credit active population,” the report said.

Asset Quality

Delinquency rates for most major retail lending products declined or remained relatively stable over the year ended Q2 2018, indicating that consumers continue to do a good job of managing their credit obligations.

Delinquency rates have also partly remained low due to the rapid growth in the portfolio.

The exception was loans against property (LAP), which saw a year-over-year increase of 65 basis points (bps). Despite the worsening asset quality, the LAP portfolio has shown faster growth in January-March period. This has been due to higher ticket size and the increase in the number of eligible customers who can access these loans, the report said.