Mumbai: India’s retail credit market saw a moderation in consumer demand during the January–March 2025 quarter, according to the latest TransUnion CIBIL Credit Market Report.
While the retail Credit Market Indicator (CMI) dropped to a two-year low of 97, signaling softening market health, the quarter brought positive news with improving delinquencies in key consumption-led credit segments such as personal loans, consumer durable loans, and credit cards.
Retail Credit Market Sees Demand Slowdown, Driven by Youth Segment Decline
Credit demand growth slowed to 5% YoY in March 2025 compared to 12% in March 2024, largely due to a drop in enquiries from consumers aged 35 and below. This led to a 3-percentage point decline in the share of New-to-Credit (NTC) customers during the period.
The CMI for demand fell from 95 in March 2024 to 92 in March 2025, with urban and metro areas showing a sharp decline in enquiry volumes – from 51% to 48%.
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In contrast, rural and semi-urban regions gained momentum, increasing their enquiry share from 49% to 52%, highlighting the growing impact of financial inclusion initiatives.
“While urban credit appetite softens, rural and semi-urban India is emerging as a credit growth engine,” said Bhavesh Jain, MD & CEO, TransUnion CIBIL. “This behavioral and geographic shift underscores the importance of aligning credit products to the evolving needs of emerging borrowers.”
Credit Supply Up Marginally; Lenders Prefer High-Ticket Loans
The CMI for supply rose marginally from 92 to 93 in the quarter, reflecting lenders’ inclination toward high-ticket loans. This was especially evident in:
- Home loans above ₹1 crore, which grew 9% YoY in Q4 FY25, even as overall home loan originations declined by 7%.
- Two-wheeler loans above ₹1.5 lakh, which increased 7% YoY, in contrast to a 1% drop across the overall category.
Lenders’ focus on high-value assets is reshaping loan portfolios, even as growth in personal and consumer durable loans – typically favored by first-time borrowers – remains sluggish. This shift contributed to a drop in the share of NTC originations to 16%, raising concerns about the pace of financial inclusion.
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“A slowdown in NTC onboarding hampers long-term credit penetration. As interest rates normalize, we expect an uptick in credit supply – especially in the home loan segment,” Jain added.
Delinquencies Improve Across Key Segments
A key highlight of the retail credit market report is the improvement in balance-level delinquencies:
- Credit card delinquencies (90+ DPD) eased to 2.00% in March 2025, from 2.04% in December 2024.
- Personal loan delinquencies dropped to 1.14% in March 2025, down from 1.34% in December 2024.
This marks the first quarter-over-quarter improvement in credit card performance in the past year, suggesting enhanced consumer repayment behavior and prudent underwriting by lenders.
“The decline in delinquencies indicates improved financial discipline among borrowers and robust risk management practices by lenders,” Jain noted.
