India’s retail credit growth slowed in the quarter ending September 2024, according to the TransUnion CIBIL Credit Market Indicator (CMI) report. While credit demand and supply declined across most products, credit cards stood out with strong portfolio growth, highlighting their increasing role in consumer finance.

The CMI for September 2024 dropped to 100 from 103 a year earlier, reflecting cooling demand and cautious lending practices.

Bhavesh Jain, MD and CEO of TransUnion CIBIL, attributed this moderation to global economic challenges, slower urban consumption, and regulatory efforts to stabilize credit-deposit ratios.

Credit card portfolio balances grew 34% year-over-year (YoY) in September 2024, up from 26% growth in 2023. This surge came even as new credit card originations fell 24% YoY.

Analysts believe consumers are relying on their existing cards to finance expenses, as loan originations for personal and consumer durable loans slowed during the same period.

“The growing use of credit cards for both transactions and credit access underscores their importance in consumption-led financing,” said Jain.

He urged lenders to provide tailored credit solutions that meet consumers’ aspirations while improving their financial stability.

While personal loans grew 11% YoY in originations, this was a significant drop from 32% in the previous year. Other products, including home loans, auto loans, and consumer durable loans, recorded negative growth in new accounts.

Total credit supply for consumption-driven loans dropped, with credit cards witnessing a 20% decline in origination values.

Credit card delinquencies (90+ days past due) increased by 31 basis points (bps) YoY, reaching 2% in September 2024. Delinquencies in consumer durable loans also rose, highlighting growing stress in consumption-led borrowing.

Conversely, secured loans like home loans and auto loans showed improved repayment behavior.

TransUnion CIBIL’s analysis revealed that 4.1% of borrowers with both secured and consumption loans were delinquent on at least one consumption loan, up from 3.9% last year.

“Early signs of stress in consumption loans could eventually impact secured loan portfolios. Active credit monitoring is essential,” warned Jain.

Despite challenges, credit cards remain a bright spot. Jain emphasised that lenders could leverage credit card data to identify borrowers’ evolving needs and offer customized solutions.

“Dynamic strategies backed by data insights can drive consumer loyalty while managing risks,” he added.