India’s consumer credit market projected to grow at higher rate than major global economies: Report

India’s credit ecosystem remains resilient despite the pandemic, revealed the latest joint report titled “A Review of India’s Credit Ecosystem” by Experian, the world’s leading global information services company, and Invest India, the national agency for investment and facilitation.

The report “A Review of India’s Credit Ecosystem” highlighted several key trends in the lending sector, notably, a key trend where India’s consumer credit market is projected to grow at a higher rate than most major economies globally.

According to the release issued by Experian and Invest India on Wednesday, the projected growth will be driven by a shift in India’s demography, a burgeoning affluent middle class ramping up private consumption, as well as growth in rural populations, all catalysed by technology.

Recognising gaps in the market for the unbanked and underserved populations, the report explored how NBFCs and fintechs have transformed the lending landscape to cater to the financial needs of these consumers. The report also highlighted the regulatory environment supporting India’s credit ecosystem throughout the pandemic.

The report’s data, which tracked India’s credit ecosystem from March 2017 to February 2021, highlighted a V-shaped recovery across Indian markets, with a gradual and steady improvement in sourcing trends.

New sourcing crossed the pre-COVID-19 level in October 2020; however, sourcing volumes declined from January 2021 onwards due to the second COVID-19 wave and lockdowns being imposed. A remarkable recovery was observed across all unsecured credit products.

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 credit portfolio has been resilient, in February 2021, growth stood at eight per cent year-on-year for the portfolio of key products, lower than the 13 per cent observed for March 2020. The pace of growth slowed down for all products, however, with unsecured products experiencing a faster year-on-year growth rate compared to secured loans, as per the release.

Neeraj Dhawan, Managing Director of Experian India, while talking about the report said, “The behavioural shift in Indian population has been tremendous just over the last five years. Consumerism has been growing in the previously untapped semi-urban and rural regions as millennials become the main driving force of the mass market.”

He noted that the technological adaption is steep which has, in turn, created acceptance for new financial tools.

“The biggest beneficiary of this change is the credit market, which is evolving into a self-generating and self-sustaining one. In line with this trend, the risk appetite of traditionally conservative lenders is growing as the horizon of creditworthiness expands. With its array of innovative solutions that help businesses in credit evaluation, smarter lending decisions and safeguarding themselves and their customers from fraud, Experian is at the forefront and one of the main enablers of this shift,” Shawan added.

As per Deepak Bagla, Managing Director and CEO, Invest India, India is making giant strides in financial inclusion.

“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. Additionally, rapid technological advancements have further expedited the growth of the credit lending ecosystem. The report attempts to bring forward credible and practical information about the credit industry in these unprecedented times. This report which illustrates Experian and Invest India’s shared commitment to advancing excellence in India’s credit system,” said Bagla.

The report also highlighted various factors of the Indian economy like–demand for credit-fuelled consumption; increase in the purchasing power of an average Indian; shift in the demographic profile of the consumer; changing customer landscape with the rising role of fintech.

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