In a sign of a rapid expansion in unsecured lending, a credit reporting firm said on Tuesday that the three months ending May 2022 saw the strongest growth in inquiries about these risky credit products.
The volume of personal loan applications rose 141% in the three months to May compared to the year-ago period, while the volume of credit card applications rose 68%, according to a report by Transunion Cibil.
The report says this is also a continuation of the trend seen for the January-March quarter, when the two unsecured segments emerged as those with the fastest growth rates on inquiries.
Typically, lenders charge higher interest to compensate for the higher risk of these unsecured products. They are also adopting measures such as restricting exposures to customers with a credit history with them.
Loans past due for more than 90 days saw a reduction across all asset classes, showing an improvement in credit performance. But the overdue balance rate was among the highest in the credit card segment, at 2.03% in March.
The ratio of loans gone bad appears to be highest in the two-wheeled loan segment at 2.45%, while the same for personal loans stood at 0.86% and consumer durables at 1. .55%.
In terms of outstanding balance, durable consumer loans lead the pack with a jump of 27% for the three months ended March 2022 compared to the prior year period, followed by personal loans at 22% and credit cards at 17%.
Vehicle lenders have been hit due to supply chain issues in the auto segment, with two-wheeler and auto loans seeing the lowest level of inquiries.
When it comes to loan approvals, lenders are still taking a conservative stance, the report said, adding that they are slow to onboard new customers.
CIC’s Credit Market Indicator (CHI), designed to provide the Indian credit sector with a reliable and contemporary benchmark of retail lending health, is trending upwards and stood at 95 in March 2022 , similar to the level of 94 seen in March 2020, he said. .
“Not only are we seeing a general increase in our overall MI measure, but we are also seeing lower delinquencies, greater credit inclusion, and credit growth in rural and semi-urban areas,” said the Managing Director and Chief Executive of CIC, Rajesh Kumar.