Credit card payment defaults on the rise, retail loans show high growth: CIBIL

Defaults by credit card borrowers are rising, according to a report by Transunion CIBIL, the credit scoring company. At the same time, demand for retail loans is growing at a robust pace.

For the January-March 2023 quarter, 2.94 percent of credit card borrowers hadn't paid up by the 90-day period, versus 2.28 percent in the year-ago quarter, indicating that defaults are creeping up.

However, in retail loan categories, like auto loans, two-wheeler loans, personal loans, home loans, and loans against property, the percentage of defaults fell marginally from year-ago levels, as per CIBIL data.

PERCENTAGE OF LOANS THAT ARE 90 DAYS PAST DUE ( by product type)

As per CIBIL data, the growth in loans in the January-March 2023 quarter (in terms of volume of loans originated) was in double digits for most loan categories like consumer durable loans, credit cards, personal loans, two-wheeler loans and car loans.

This is commendable since the double-digit growth is coming over fairly strong growth a year ago as well. Only home loans fell by 11 percent , while loans against property were flat. Loan approvals were marginally lower than the year-ago level for most categories except consumer durable loans, indicating that lenders have become more cautious.

Here's the full table

APPROVAL RATE OF LOANS (BY PRODUCT TYPE)

Speaking on the findings of the quarterly report, the MD and CEO of TransUnion CIBIL, Rajesh Kumar, said: “Digital and information-oriented lending is fuelling the growth of retail credit, especially in unsecured consumption-led products, which grew at a compounded annual growth rate (CAGR) of 47 percent from the quarter ending March 2021 to March 2023."

"Responsible lending, continuous portfolio monitoring and controlling concentration risk will be essential for sustaining the growth momentum," he added.