The moderation in economic growth is getting mirrored in the off-take of consumer credit products. The demand for home loans and loans against property fell in the September quarter, and overall delinquency rates increased marginally. However, the demand for consumption lending products like credit cards and personal loans increased, according to the latest TransUnion CIBIL (TU CIBIL) Industry Insights Report.

“Overall delinquency rates showed a marginal increase, with large variances in performance across product types,” says TU CIBIL.

Overall balances across all major consumer lending products increased by an annual 13.1% in Q3-2019, compared to 23.2% annual growth seen in Q3-2018. TU CIBIL highlighted that although still strong, this is now the sixth consecutive quarter where growth in credit balances has decelerated.

The consumption lending categories of credit cards and personal loans recorded growth rates of 40.7% and 28%, respectively, 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%, each.

The quarter ended September 2019, saw 32.1% annual growth in overall origination volumes, but this average belies a much more diverse story across categories, according to TU CIBIL. Personal loan new account origination volumes recorded dramatic annual growth of 133.9% in Q3-2019.

Non-banking financial companies (NBFCs), which have grown their share of personal loan origination in recent years, continued to focus on acquiring smaller value personal loans. Credit card origination volumes grew a healthy 20.9%, while LAP origination volumes grew marginally by 1.2% in Q3-2019. Meanwhile, home loans and auto loans saw annual declines of 12.9% and 1.0% each in origination.

Serious delinquencies, which are very troubling for lenders, showed a relatively small increase of 10 basis points (bps) at overall balance level. 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). On the other hand, overall delinquencies actually improved for auto loans (down 22 bps) and personal loans (down 5 bps).

Overall delinquency rates have increased by an annual 51 bps in Q3-2019 for NBFCs, which continue to show signs of stress. At the same time, delinquency rates for public sector and private sector banks have declined by an annual 26 bps and 9 bps, respectively.

“Vintage analysis showed encouraging signs for the home loan and LAP categories, with improvements of 312 bps and 205 bps, respectively, indicating better credit selection,” says TU CIBIL. 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,” TU CIBIL added.

Within the subsets of consumer credit products, credit card balances and number of accounts increased by an annual 40.7% and 29.8% respectively taking total balances to ₹109,000 crore and number of active cards in circulation to 44.5 million. Balances of private bank card issuers increased by an annual 50.7% while for other card issuers increased by an annual 26.9%.

“Consumers’ willingness and ability to spend propelled another strong quarter of origination and balance growth for credit cards,” says TU CIBIL. Balances in semi-urban and rural areas increased by an annual 52.3% in Q3-2019 indicating increased usage of cards as a payment option in these locations. The average balance per account as on Q3-2019 was ₹24,500, up from ₹22,600 as on Q3-2018.

On the other hand, home loans, that constitute almost 50% of the total consumer credit portfolio, saw slower growth in balances in Q3-2019, at 10.0% compared to 20.3% in Q3-2018. Balance growth has slowed down for housing finance companies (HFC) with their balances increasing by an annual 7.9% in Q3-2019 as against an increase of 23.2% in Q3-2018.

Affordable housing segment, defined as loan size up to ₹25 lakh, saw lowest annual growth of 4.1% in Q3 2019. “Credit growth in home loans continues to decelerate as aspiring buyers are putting off purchase decisions because they lack confidence,” notes TU CIBIL.

Home loan origination volumes and origination balances declined by an annual 12.9% and 7.8% respectively in Q3-2019. Balances originated by public sector banks and private banks increased by an annual 8.0% and 2.8% respectively, while those of HFCs declined by an annual 20.6% in Q3-2019. “Share of public sector banks in total balances originated increased by 5.6% over Q3-2018,” TU CIBIL noted.

Like other categories, auto loan balances increased by an annual 10.3% in Q3-2019, much lower in comparison to 16.8% increase in Q3-2018. “Decline in growth of passenger vehicle sales continued to impact auto loan growth,” says TU CIBIL. NBFC auto loan balances showed better growth in Q3-2019, increasing by an annual 16.3%. Origination volumes and origination balances of auto loans declined by 1.0% and 3.5% respectively in Q3-2019 compared to an increase of 4.5% and 0.8% in Q3-2018.

Finally, LAP balances grew at 11.6% in Q3-2019 compared to 29.0% in Q3-2018. LAP balances of private banks grew by at a healthy rate of 28.1% thereby increasing their market share by 4.4% over previous year, while balances of public sector banks and NBFCs increased by 11.3% and 3.2% respectively.

“Credit growth in loans against property has been limited due to lower credit off-take in self-employed segment who largely avail LAP for their business or capital expenditure needs,” TU CIBIL highlighted.

In a January 20 note by Macquarie Capital Securities (India), banking analysts Suresh Ganapathy and Nishant Shah noted that delinquencies across product levels in the retail segment have shown a modest increase, “but the situation is not alarming.”

While there has been a lot of negative news flow surrounding growth slowdown and rising unemployment, in the Macquarie analysts’ view, data from CIBIL suggests that though there is an uptick in delinquency rates in certain segments, there is no build-up of significant stress in retail credit yet.

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