Credit card payment defaults have surged in June 2023 despite the growth of credit card lending, as per a TOI report.
Unsecured credit portfolios and small-ticket loans have driven retail credit expansion, TransUnion Cibil’s credit market indicator report showed.
While ‘serious delinquency’ (over 90 days past due) rate for credit cards rose by 66 basis points (100bps = 1 percentage point) year-over-year, reaching 2.9%, consumers have shown responsible credit repayment behaviour in other retail categories. For instance, the rate of delinquency in consumer durables increased by 1 basis point to 1.5%, nearly remaining steady. Delinquency, which is a type of default, is a situation in which the borrower is behind on payments.
“Digital and information-oriented lending is fuelling the growth of retail credit, particularly in unsecured consumption-led products, which have seen a compound annual growth rate of 47% from March 2021 to March 2023,” said TransUnion Cibil MD & CEO Rajesh Kumar.
The growth in retail credit is happening amid concerns raised by the RBI over the increase in unsecured personal loans. “Responsible lending, continuous portfolio monitoring, and controlling concentration risk will be vital for sustaining the growth momentum,” said Kumar.
While originations remained strong, lenders were cautious, which led to lower approval rates than the previous year for all loan types. New-to-credit (NTC) consumers experienced a decline in approval rates from 34% and 28% in March 2020 and 2021, respectively, to 23% in the March 2023 quarter.
The decline of new loans in the affordable housing market (loans under Rs 2 lakh) is indicative of the cautious attitude taken by lenders.This affordable segment witnessed a year-on-year drop of 16% in the number of loans and 15% in the sanctioned amount. Conversely, other home loans experienced growth of 1% in volume and 6% in value. Except mortgage loans, all other credit products exhibited double-digit growth.