Consumer Credit Growth
Focused on Consumption Lending
· Demand for home loans and loans against property falls, while
demand for consumption lending products increases
· Greater lender focus on rural and semi-urban locations
Continued consumer
credit growth, concentrated in consumption lending categories including credit
cards and personal loans, is the headline finding of the newly-released
TransUnion CIBIL CY Q3 2019 Industry Insights Report.
During the period, growth
in the wider market continued to cool and overall delinquency rates showed a
marginal increase, with large variances in performance across product types.
The third quarter
results show the continued development of trends seen in the first half of the
year, as lenders and consumers continue to adjust to moderating macro-economic
conditions.
In Q3 2019,overall
balances across all major consumer lending products increased by 13.1%
year-on-year (YoY), compared to 23.2% YoY growth the prior year in Q3 2018.
Although still strong, this is now the sixth consecutive quarter where growth
in credit balances has decelerated. This growth is not uniform across all of the
major consumer lending categories.
The consumption lending categories of credit
cards and personal loans recorded growth rates of 40.7% and 28.0%, respectively,
YoY in Q3 2019, whereas auto loans, loans against property (LAP) and home loans
recorded comparatively more moderate rates of balance growth at 10.3%, 11.6%
and 10.0%, respectively.
Similarly,
overall origination volumes grew 32.1% YoY in Q3 2019, but this average belies
a much more diverse story across categories as much of the overall growth was
driven by a single category. Personal loan new account origination
volumes recorded dramatic YoY growth of 133.9% in Q3 2019 as consumer demand
for this credit product continued to accelerate. Non-banking financial
companies (NBFCs), which have grown their share of personal loan originations
in recent years, continue to focus on acquiring smaller value personal loans. The
average ticket size (ATS) of NBFC personal loans dropped YoY to INR 37 thousand
in Q3 2019 from INR 94 thousand in Q3 2018.Looking at originations growth of
other products, credit card origination volumes grew a healthy20.9% YoY in Q3
2019, while LAP origination volumes grew marginally by 1.2% YoY in Q3 2019. Meanwhile,
home loans (-12.9%)and auto loans (-1.0%)saw YoY declines in originations.
Growth in overall
origination balances of installment credit products remained broadly flat in Q3
2019, compared to an increase of 15.1% in Q3 2018. However, growth was far from
uniform. Origination balances of consumption lending categories(personal loans
and consumer durable loans) grew at 24.1% YoY, while those of asset finance
products (auto loans, two-wheeler loans, LAP, home loans) declined by 8.4% YoY.
The share of consumption products to total balances originated increased to 31.2%
in Q3 2019,compared to 25.1% in Q3 2018.
“Our findings suggest the shift
toward consumption lending categories is becoming more sustained and is supported
by a strong demand for these products. Consumer inquiry volumes for personal loans
and credit cards increased significantly over the period, whereas we saw inquiries
were broadly unchanged or slightly down for loans against property and home
loans.” said Abhay Kelkar, vice president of research and consulting for
TransUnion CIBIL. “This change in demand might, in part, be driven by consumer
sentiment and wider macroeconomic pressures. Flattening demand for large-ticket
asset purchases is causing slower asset finance loan originations, while
consumers may be increasingly turning to consumption credit products to help
finance day-to-day living expenses. This shift in consumer credit demand
warrants ongoing monitoring to understand the impact on lender portfolios.”
Q3 2019 India
Consumer Credit Market at a Glance – Consumption Lending Driving Growth
|
Credit Product
|
Inquiry volumes YoY %
Change
|
Origination volumes YoY % Change
|
Total Balances YoY% Change
|
Serious Delinquency1 Rates YoY Basis Point
Change
|
Vintage Delinquency2 YoY Basis Point Change
|
|
Credit Card
|
42.6%
|
20.9%
|
40.7%
|
+10
|
-78
|
|
Personal Loan
|
65.6%
|
134.0%
|
28.0%
|
-5
|
-55
|
|
Auto Loan
|
16.5%
|
-1.0%
|
10.3%
|
-22
|
+151
|
|
Home Loan
|
-2.1%
|
-12.9%
|
10.0%
|
+13
|
-312
|
|
Loans Against
Property
|
0.1%
|
1.2%
|
11.6%
|
+52
|
-205
|
1.
Serious
delinquency rates are measured as the percentage of balances 90 or more days
past due (DPD)
2.
Vintage
delinquency looked at all accounts originated in Q1 2018 and Q1 2019 and
compared 30+ DPD delinquency rates of those new accounts 6 months later.
Positive numbers indicate higher delinquencies for the more recent vintage,
while negative numbers indicate lower delinquencies for the recent vintage.
Rural urban lending
divide narrows
Growth in consumer
lending is no longer concentrated in metro locations. Lenders have increased
credit penetration to less densely populated geographies as part of their
expansion strategies. Consumers in semi-urban and rural areas have also shown
increased willingness to seek loans from formal lending institutions.
Total balances
from rural and semi-urban locations increased by 17.4% YoY in Q3 2019, whilst
those in metro and urban areas increased by 11.4% YoY, albeit from a higher
level. The higher growth in balances from rural and
semi-urban locations is seen across product types, indicating a greater
focus by lenders on geographical diversity.
The growth in
lendingin rural and semi-urban areas is led by both strong consumer demand and
solid lender supply. Loan inquiry volumes in rural and semi-urban locations
increased by 45.7% YoY, while origination volumes increased by 41.0% YoY. This
compares to a 32.4% YoY growth in inquiry volumes and 27.3% YoY growth in
origination volumes for metro and urban areas.
Delinquencies
Overall balance-level
serious delinquencies showed a relatively small increase of10 basis points(bps)
YoY in Q3 2019.As with other measures, the increase in delinquency rates was not
uniform and was most pronounced for LAP (up 52 bps), home loans (up 13 bps) and
credit cards (up 10 bps). Overall delinquencies actually improved for auto loans
(down 22 bps) and personal loans (down 5 bps).
However, it can
happen that high origination growth can mask portfolio-level delinquencies. To
address this concern, TransUnion carried out a static pool analysis – also known
as vintage analysis. Vintage analysis looked at all accounts originated in Q1
2018 and Q1 2019 and compared 30+ DPD delinquency rates of those new accounts 6
months later.
Positive numbers indicate higher delinquencies for the more
recent vintage, while negative numbers indicate lower delinquencies for the
recent vintage. This analysis of more recent loan originations (accounts
originated in Q1 2019) did show more encouraging signs for the home loan and
LAP categories, with improvements of 312 bps and 205 bps, respectively,
indicating better credit selection. Credit cards and personal loans also showed
an improvement of 78 bps and 55 bps respectively. However, the same vintage
analysis for auto loans did show an increase of 151 bps in delinquencies.
For personal
loans and auto loans, there has been a marked increase in originations for
consumers in the below-prime*risk segment. Almost 30.5% of auto loan
originations and 34.7% of personal loan originations in Q3 2019 were to
borrowers considered below-prime – representing increases of 3.5% and 8.3%,
respectively, over Q3 2018. Accordingly, auto loan has experienced sharper
increases in vintage delinquencies.
Overall delinquency
rates have increased by 51bps YoY in Q3 2019 for NBFCs, which continue to show
signs of stress. At the same time, delinquency rates for public sector (PSU)
and private sector (PVT) banks have declined by 26bps and 9bps, respectively
YoY.
“The availability of consumer credit
can be an important catalyst for continued economic growth, and it is clear
there is still an appetite in the market to support this goal. While overall
credit selection shows an improvement in recent quarters, there is increased intake
risk seen in auto loan acquisitions. As lenders relax their underwriting
strategies, it is important that they continue to assess the impact of these
changes on risk and actively monitor their portfolios,” concluded Kelkar.
*TransUnion CIBIL
Credit Vision (CV) score tiers: subprime = 300-680, near prime = 681-730, prime
= 731-770, prime plus = 771-790, and super prime = 791-900. Higher scores are
indicative of lower risk. Grouped together, below prime segments constitute a
CV score of≤730 and prime or above aCV score of≥731.
For more
information about the TransUnion CIBIL Industry Insights Report, please visit https://www.transunioncibil.com/insights-events
About the TransUnion
CIBILIndustry Insights Report
TransUnion CIBIL’s Industry
Insights Report is an in-depth, full-population solution that provides
statistical information every quarter from TransUnion CIBIL’s consumer bureau
database, aggregated across virtually every live credit file on record. Each
file contains hundreds of credit variables that illustrate consumer credit
usage and performance. By leveraging the Industry Insights Report, institutions
across a variety of industries can analyze market dynamics over an entire
business cycle, helping to understand consumer behavior over time and across
different geographic locations throughout India. Businesses can access more
details about and subscribe to the Industry Insights Report at
About TransUnion CIBIL
TransUnion CIBIL is India’s leading credit information company and
maintains one of the largest repositories of credit information globally. We
have over 3000 members–including all leading banks, financial institutions,
non-banking financial companies and housing finance companies–and maintain more
than 1000 million credit records of individuals and businesses.
Our mission is to create information solutions that enable businesses to
grow and give consumers faster, cheaper access to credit and other services. We
create value for our members by helping them manage risk and devise appropriate
lending strategies to reduce costs and increase portfolio profitability. With
comprehensive, reliable information on consumer and commercial borrowers, they
are able to make sound credit decisions about individuals and businesses.
Through the power of information, TransUnion CIBIL is working to support our
members drive credit penetration and financial inclusion for building a
stronger economy.
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