India’s consumer credit market seen growing faster than major economies

Photo by Oleg Magni from Pexels

India’s consumer credit market is projected to grow at a higher rate than most major economies worldwide, according to the latest Experian-Invest India Credit Ecosystem Review report.

The report’s data, which tracks India’s credit ecosystem from March 2017 to February 2021, highlights a V-shaped recovery across Indian markets.

Recovery of personal loans has been high in both low (<Rs 1 Lakh) and high (>Rs 5 Lakh) ticket size segments while the recovery in higher ticket size loans is also improving steadily.

“The behavioural shift in Indian population has been tremendous just over the last five years,” said Neeraj Dhawan, Managing Director of Experian India. Technological adaption is steep which has, in turn, created acceptance for new financial tools, he added.

The rise in the ‘affluent middle class’ and growth in the rural economy is changing consumer spending patterns and driving the bulk of India’s consumption growth. India’s domestic credit growth has averaged 15.1% from March 2000 to March 2021, primarily driven by retail loans and increasing penetration of credit cards.

The Indian consumer credit market continues to expand at a rate higher than most other major economies globally with 22 million Indian consumers applying for new credits every month.

With India’s rising affluence, domestic consumption in the last decade has also increased 3.5 times from Rs 31 trillion ($0.42 trillion) to Rs 110 trillion ($1.50 trillion).

There has been in an increase in expansion of credit to tier 3 and 4 markets for lending. These markets have witnessed a sharp rise in low-ticket high-volume lending products like two-wheelers, entry-level cars, and affordable housing. Meanwhile, metros remain the biggest lending markets given the skew of the working population.