Slowdown in growth is due to the consumption loans segment like consumer durable loans and credit cards

PTI New Delhi

Growth in retail loan originations fell to 5% in the fourth quarter of FY25, largely as younger borrowers refrained from credit, a credit information company said on Friday. The retail credit originations growth had stood at 12% in the year-ago period, the report by Transunion Cibil said.

The CIC (credit information company) said a bulk of the slowdown in growth is due to the consumption loans segment like consumer durable loans and credit cards, and added that those under 35 years of age, especially ones living in metros and urban areas, are not borrowing as much. In late 2023, the RBI had imposed measures to check the high growth in the riskier unsecured loan segment, which has had the desired objective of moderating growth in credit cards and personal loans segment.

Cibil said the credit card origination volumes degrew 32% as against 0% in the year-ago period, while the growth for personal loan was 6% as against 13% last year, and consumer durable loans rose by 6% as against 19%. Growth in credit active consumers declined to 8% from the year-ago period's 15%, the report said. 

The muted demand was more pronounced among consumers aged 35 years or younger, the CIC said, adding that this resulted in a 3 percentage point decrease in the new to credit (NTC) originations to 16%.  Consequently, the share of NTC consumers that lenders supplied decreased by three percentage points during the same period, given that a large share of younger consumers constitute the NTC segment.

"A decline in the pace at which NTC consumers are granted access to the financial system is concerning, as a healthy share of these borrowers is essential for continued efforts of deepening financial inclusion when large sections of our population remain outside the formal credit system," the company's MD and CEO Bhavesh Jain said.