India’s retail credit growth experienced a notable slowdown in the quarter ending December 2024, with a significant 21% year-on-year (YoY) decline in loan originations among new-to-credit (NTC) consumers—those accessing credit for the first time. This trend is particularly evident in consumption-led credit products, such as credit cards, personal loans, and consumer durable loans.
Key Findings:
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Decline in NTC Consumer Participation: The share of total loan originations by NTC consumers decreased to 17% in December 2024, down from 21% in December 2023. This decline is consistent across key product segments, indicating a broader trend of reduced engagement from first-time borrowers.
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Overall Retail Credit Growth Moderation: The Credit Market Indicator (CMI) value for September 2024 was 100, a slight decrease from 103 in September 2023, reflecting a general moderation in retail credit growth across most products.
Implications:
The reduction in loan originations among NTC consumers suggests increased caution among first-time borrowers, potentially impacting overall consumption and economic expansion. Financial institutions may need to reassess their strategies to engage this segment, ensuring that credit products are accessible and appealing to new borrowers while maintaining prudent risk management practices.
Conclusion:
The observed moderation in retail credit growth, particularly among new-to-credit consumers, highlights the need for targeted efforts to stimulate responsible borrowing and support economic growth. Financial institutions and policymakers should collaborate to enhance financial literacy, tailor credit products to meet the needs of first-time borrowers, and implement measures that encourage prudent credit uptake in this demographic.
