At the midpoint of 2018, three of the large Indian states – Maharashtra, Tamil Nadu and Karnataka – comprised nearly 40% of all retail lending* balances despite representing about 32% of the overall credit population share (source: TransUnion CIBIL database) and around 20% of the aggregate Indian population (as per Census 2011). The new Q2 2018 TransUnion CIBIL Industry Insights Report found this concentration of retail lending activity among the large states, with economic development and urbanization as the likely drivers of this trend.
Retail balances as of June 2018 were highest in Maharashtra at Rs 5,502 billion – representing nearly 20% of all retail balances in India–followed by Tamil Nadu (Rs 2,774 billion) and Karnataka (Rs 2,749 billion). In total, the 10 largest Indian states represented Rs 21,274 billion in balances, which comprised almost 76% of the total balance share. At the same time, the 10 largest balance markets made up 68% of the consumer credit population.
“It’s clear that the major urban areas of India are leading the charge for increased retail credit use,” said Yogendra Singh, vice president of research and consulting for TransUnion CIBIL. “These states generally have more urbanized areas and show more signs of economic development. As a result, consumers in these areas are utilizing various forms of credit to enhance their lives.”
Overall, TransUnion CIBIL found that retail lending balances increased by nearly 27% between Q2 2017 and Q2 2018. Personal loan balances (up 43%) and credit card balances (up 42%) grew at the highest rate of all major credit products in the last year. Average borrower balance growth for both of these credit products increased nearly 14% in that same timeframe.
“Total balance growth was broad-based across all products, increasing by at least 23% year-over-year for all major products,” said Singh. “Balances growth was largely driven by volume (i.e. number of accounts) growth that rose at least 20% for most major credit products. The retail lending sector continues to expand strongly, as consumers are seeking credit and lenders are making credit available. With delinquency rates generally remaining at controlled levels, this points to a well-functioning consumer credit market.”
While total balances and account volumes rose, average consumer balances increased modestly. Low double-digit annual increases in average consumer balances of credit cards and personal loans was counter balanced by continued declines in consumer durables and loans against property and more modest increases in vehicle financing products like auto loans and two wheeler loans as well as mortgages.
Loans against property was the only product category which witnessed a significant increase in serious delinquency rates, growing by 65 basis points (bps) year-over-year to 3.04% in Q2 2018. Delinquency rates rose modestly for home loans and credit cards and continued to decline for auto loans, personal loans and two wheeler loans.
“Increased use of credit and the consequent balance growth is beneficial for the Indian consumer credit market, but maintaining relatively low delinquency rates is just as important,” said Singh. “Indian consumers need to continue to show that they can manage their debt obligations, and this continued practice will likely result in more credit offers.”