Over the past three years, India’s retail credit market has been undergoing a gradual but unmistakable transformation, marked by evolving consumer behaviour, a recalibration of lender strategies and a shift in risk appetite. The
June 2025 Credit Market Indicator (CMI) report released by TransUnion CIBIL offers compelling insights into this evolution, moving beyond short-term fluctuations to reveal deeper structural shifts in demand, supply and performance across the lending landscape.
Credit demand, which had surged in the post-pandemic period, has been stabilising steadily, especially among younger consumers aged 35 and below. Their share in total credit enquiries has consistently declined, reflecting both cautious borrowing and the saturation of high-frequency loan products such as personal loans and credit cards. Interestingly, demand from semi-urban and rural areas has become more prominent, suggesting a gradual geographical broadening of the credit landscape.
Over the same period, lenders have adopted a noticeably more cautious and calibrated approach to origination. There has been a consistent shift toward higher-ticket loans and more creditworthy borrowers. Home loans above Rs1 crore, auto loans in the Rs10 lakh–Rs25 lakh range and premium two-wheeler (2W) and consumer durable loans have grown their share, while smaller-ticket, unsecured loans have seen tempered growth or outright decline. This strategic rebalancing reflects a growing risk consciousness among lenders, especially in the wake of rising delinquency concerns during the 2022–23 period.
New-to-credit (NTC) consumers, once a major driver of portfolio expansion, are also receiving more scrutiny. Their share in total originations has steadily declined, from 19% in early 2023 to 16% by March 2025. This reflects a more selective approach from lenders, who now appear to be prioritising stable, scoreable borrowers over financial inclusion in the short term. The decline is more noticeable in metro and urban centres, while semi-urban and rural regions have shown greater persistence in new borrower entry.
Meanwhile, the composition of lenders is shifting. Non-banking financial companies (NBFCs), including fin-techs and housing finance companies, have continued to expand their footprint, particularly in segments where traditional banks are retreating. Over a three-year window, NBFCs have not only increased their share of disbursals but have also posted consistent growth in the value of loans sanctioned—particularly in secured asset categories. However, even this growth has moderated compared to earlier periods, underscoring a more cautious climate industry-wide.
From a performance standpoint, the long-term picture is cautiously optimistic. Delinquency rates across most consumption-led products—such as personal loans, credit cards and consumer durable loans—have stabilised since late 2024, following a period of deterioration in 2022 and early 2023. Personal loans, in particular, have shown improving trends, with 90+ day past due balances declining over successive quarters. This trend is supported by a rise in the share of prime and above-prime consumers in overall portfolios, as well as a greater incidence of score upgrades within the prime segment.
Consumer credit penetration has also advanced over the past three years, especially in the 35–45 age bracket, where over a third of adults are now credit-active. However, overall credit activity growth has slowed, with the expansion in credit-active consumers falling to 8% year-on-year in March 2025—the slowest since 2022. This deceleration likely reflects both market saturation in certain urban segments and more restrained lending postures from financial institutions.
In summary, the retail credit market in India is evolving beyond the explosive, consumption-led growth phase of the early 2020s. The past few years reflect a decisive shift towards maturity, prudence and sustainability. Lenders are refining their portfolios, consumers are becoming more disciplined and credit flows are being rebalanced towards more secure and higher-quality segments. While this may result in slower overall growth in the short term, the structural improvements in credit behaviour and risk management suggest a more resilient and balanced credit ecosystem over the long run.
