India Global News

Between April and June 2023, credit card payment defaults in India increase to 2.94%

<p>According to a TransUnion CIBIL research, credit card payment failures have grown despite India’s retail credit market’s continued strong development trend. It further said that growth supported by small-ticket loans continues to rise with unsecured loans.</p>
<p>In the June 2023 quarter, substantial delinquency—defined as a payment that is late by more than 90 days—increased by 66 basis points year over year to 2.94 percent, according to the study titled “Credit Market Indicator.” 100th of a percentage point is known as a basis point.<img decoding=”async” class=”alignnone wp-image-78262″ src=”” alt=”” width=”1093″ height=”819″ srcset=” 259w,×112.jpg 150w” sizes=”(max-width: 1093px) 100vw, 1093px” /></p>
<p>The situation has improved in other credit categories nevertheless. Although credit defaults for consumer durable loans remained steady, delinquencies for other loan types, including house loans, loans secured by property, car loans, two-wheeler loans, and personal loans, decreased by between (-)4 bps and (-119 bps.</p>
<p>When a borrower falls behind on their payments, this is referred to as delinquency.</p>
<p>“Digital and information-oriented lending is fueling the growth of retail credit, especially in unsecured consumption-led products,” said Rajesh Kumar, MD and CEO of TransUnion CIBIL. “Retail credit, especially in unsecured consumption-led products, grew at a compounded annual growth rate (CAGR) of 47% from the quarter ending March 2021 to March 2023. For the economy to continue growing, responsible lending, ongoing portfolio monitoring, and concentration risk management are crucial.</p>
<p>The research states that the Credit Market Indicator for the first quarter of 2023 increased to 102 in March 2023 from 94 during the same period in 2022, following the general increasing trend in credit market activity witnessed since mid-2021.</p>
<p>Originations, a measure of newly established accounts that depends on both consumer demand and the availability of lenders, are still growing. However, since lenders were cautious, approval rates across all loan kinds were lower than they were at the same time last year.</p>
<p>This is especially true for customers who are new to credit (NTC), who lenders normally treat with caution: according to the research, approval rates for these consumers fell from 34% in March 2020 and 28% in March 2021 to 23% in the quarter ending in March 2023.</p>
<p>“The sustained growth in retail credit demand is a positive indicator of strength in the economy and increased consumer spending,” said Anand Agrawal, co-founder and chief product & technology officer of Credgenics. But the increase of credit card failures and decline in NTC approval are concerning. It requires our rapid attention in order to keep the danger under control without jeopardizing progress.</p>
<p>He went on to say that the quickly shifting and unpredictable economic environment, which is driven by global issues in certain industries and changing consumer behavior, may be one reason for the rise in defaults. “Consumers are becoming used to an unparalleled level of simplicity in making purchases and obtaining financing due to the rising popularity of digital commerce and the fast expansion of online transactions. Unfortunately, this also increases the likelihood of impulsive purchases and a possible lack of financial discipline.</p>
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