In Q2FY25, India's retail credit growth slowed, with the biggest drops seen in low-cost two-wheeler loans and affordable housing. Loans disbursed for affordable housing (up to Rs 35 lakh) decreased 12% year over year, while loans for homes between Rs 35 lakh and Rs 1 crore decreased 4%, according to the TransUnion Cibil credit market indicator report for the September quarter. Loans for inexpensive two-wheelers (less than Rs 75,000) decreased by 10%.

Higher-value loans, such as those for homes over Rs 1 crore and two-wheelers over Rs 1.5 lakh, on the other hand, increased by 19% and 11%, respectively, indicating a tendency toward borrowers with higher incomes. Due to slower demand and more limited supply for the majority of loan products, the report observed a general cooling of retail credit. Despite being positive, credit demand fell to its lowest level in two years, and supply decreased in all but personal loans and credit cards.

Credit cards and personal loans defied the general downturn. Although it was slower than the 32% growth observed during the same period last year, personal loan origination volumes increased 11% year over year. The use of credit cards increased, and in September 2024, outstanding portfolio balances rose 34% year over year, up from 26% in September 2023. Despite a slow increase in new loans for consumer durables and personal loans since March 2024, this trend shows a growing reliance on credit cards for consumer spending.

The growth of the portfolio balance revealed inconsistent outcomes for each product. While loans secured by real estate rose by 22% from 28% in the previous year, home loan balances increased by 14%, down from 16%. Balances on auto loans increased 20%, down from 25%, while those on two-wheelers increased 29%, down sharply from 38%. The picture of delinquencies was not uniform. Delinquency rates for secured products, such as home loans, loans secured by real estate, and auto loans, improved. Nonetheless, delinquencies increased for loans that are driven by consumption, such as personal loans and credit cards. While personal loan delinquencies increased by 14 basis points year over year, credit card delinquencies increased by 31 basis points.

Lenders are being cautious due to slowing urban consumption and global economic uncertainties.