·
The Goods and Services Tax (GST)
rationalisation and the festive season boosted retail credit demand, particularly
for consumer durable, auto and two-wheeler loans
- Younger borrowers and new-to-credit consumers (NTC) expanded
their share, particularly
in semi-urban and rural regions
- Early delinquencies emerging
in micro-loans against property (LAP) and small-ticket housing loans,
which calls for proactive monitoring of these portfolios
Mumbai
– The Goods and Services Tax (GST) rationalisation
in September 2025, just before India’s festive season, seems to have helped boost
the retail credit market. With improved affordability, retail borrowers sought more
credit. As a result, the Credit Market Indicator (CMI)1 rose to 99 for July to
September 2025, up from 98 in April to June 2025, according to TransUnion CIBIL’s December 2025 Credit
Market Report.
The CMI is a comprehensive measure of data elements that are summarized monthly to analyse changes in credit market health, categorized under four pillars of demand, supply, consumer behaviour and performance. These factors are combined into a single, comprehensive CMI Indicator, and pillars can also be viewed in more detail individually. A higher CMI reading indicates improving credit market health, while a lower reading indicates a decline.
The
rationalisation of GST (known as GST 2.0) appears to have contributed significantly
to increased credit demand from retail consumers, which reflects a strong
alignment between policy reforms and consumer behaviour, underscoring the
resilience of India’s retail credit ecosystem. As lenders respond to this
momentum, maintaining a balance between credit expansion and responsible
lending will be critical to sustaining long-term financial health.
“GST
2.0 was a much-needed step to stimulate economic growth, and its positive
impact is evident in the improvement of consumer sentiment and the upward trend
in credit demand. While fostering and sustaining this credit demand is crucial,
it is equally important to promote responsible borrowing practices. Lenders
must engage with consumers at multiple touchpoints to ensure financial
discipline and sustainability to support healthy growth of credit in India,’’ said
Mr. Bhavesh Jain, MD and CEO, TransUnion CIBIL.
Revival
in Credit Demand Led by GST 2.0 and Festive Season
Increased retail loan demand signalled renewed consumer confidence and market optimism. This improvement was particularly evident in segments such as vehicle finance (two-wheeler loans and auto loans) and consumer durables, which showed robust incremental year-over-year (YoY) growth during the pre-festive period (post-GST 2.0 implementation). This led to an increase in CMI for demand to 95 in the quarter ending September 2025, compared to 93 in the quarter ending September 2024.
While the CMI covers the period July to September
2025, TransUnion CIBIL has additionally analysed demand trends for October 2025
to capture the early impact of GST 2.0 and the festive season on consumer
credit behaviour. It compared the festive period demand in 2024 and 2025 and
GST impact in 2025 for consumer durable loans, two-wheeler loans and auto
loans. The indexed growth trends (indexed to 100 for the January to June period
of each year) indicate that the daily average demand indexed growth in consumer
durable loans increased to 189 in 2025, from 128 in 2024. Similarly, the demand
growth in two-wheeler loans increased to 272 in 2025 from 249 in 2024, and the
demand growth in auto loans increased to 133 in 2025 from 115 in 2024.
Credit
Supply Driven by Secured Assets, Semi-Urban and Rural Regions
The
CMI for supply increased to 97 during the third quarter of 2025, compared to 91
in the same quarter of 2024, primarily driven by consumption loans (except
credit cards) and gold loans.
Credit supply of secured assets such as home loans, auto loans and consumer durable loans showed positive momentum in the September 2025 quarter, despite experiencing a decline last year.
Semi-urban
and rural regions continued to outperform metro and urban areas in both credit
demand and supply, a trend that was witnessed in the previous quarter as well.
The share of semi-urban and rural consumers in overall credit supply remained higher
at 61% during the quarter ended September 2025.
“For
lenders, this presents an opportunity to focus on pockets where supply is
strong while simultaneously analysing regions showing muted growth to identify
underlying challenges. Leveraging granular data and insights will be key to
aligning strategies with evolving consumer needs and ensuring balanced credit
expansion,’’ Mr. Jain said.
Emerging
Geographies Seeing Higher Credit Growth from New-to-Credit and Younger Borrowers
The
YoY rate of growth among new-to-credit borrowers increased by 5% in the
September 2025 quarter after declining 14% YoY last year in the same period,
reaffirming the turnaround. However, this was lower than the high YoY growth
rate of 17% noted in the September 2022 quarter.
The
rate of growth among consumers younger than 35 years increased from 3% YoY in
the September 2024 quarter to 12% YoY for the same period in 2025. The growth
rate of younger borrowers in semi-urban and rural areas increased from 7% YoY to
15% YoY, while in metro and urban areas it increased to 8% YoY after falling by
3% YoY last year.
“The
resurgence in new-to-credit borrowers, coupled with the sharp increase in younger
consumer participation — particularly in semi-urban and rural regions — signals
a shift in lenders’ focus towards these segments. Lenders must capitalize on
these emerging segments by designing targeted lifecycle strategies to ensure
they support borrowers’ evolving financial needs. This approach will be
critical to sustaining growth and fostering responsible credit behaviour,” Mr.
Jain said.
Overall
Asset Quality Remains Stable with Signs of Stress in Certain Loan Segments
Balance-level delinquencies2
remained stable for key product segments, with the CMI for performance
increasing to 105 for the quarter ending September 2025, compared to 100 for
the quarter ending September 2024. This marginal increase in CMI for
performance indicates an overall stable or improving delinquency picture among
consumers. However, product-level performance reveals stress in certain
segments—particularly in micro-loan against property and small-ticket housing—which
merit closer attention.
While
property loans’ performance improved with balance-level 90+days delinquencies
at 1.4%, improving by 29 basis points YoY, early signs of stress were noted in the
micro-loans against property (LAP) segment3, where delinquency
increased 45 basis points YoY, reaching 3.3% as of September 2025. In the
micro-LAP segment early delinquencies measured as 90+ days past due reported in
12 months on book rose 29 bps YoY to 2.2% for originations in the quarter ended
September 2024, which is higher than the overall LAP early delinquencies at
1.6%. In small-ticket housing loans4, early delinquencies rose 19
bps YoY to 0.8% for originations in the quarter ended September 2024, which is
higher than overall housing loan early delinquencies at 0.5%.
“While
overall asset quality remains stable, recent trends indicate emerging stress in
specific loan segments such as micro-LAP and small-ticket housing loans. As a
facilitator of credit inclusion, TransUnion CIBIL is committed to equipping
lenders with actionable insights and advanced analytics to navigate these
challenges. Our solutions enable lenders to identify early warning signals,
assess risk effectively, and engage borrowers responsibly. By leveraging these
capabilities, lenders can mitigate stress, maintain portfolio health, and
continue fostering a robust and inclusive credit ecosystem,” Mr. Jain added.