What is the story about?
Retail credit demand strengthened in the July–September quarter as GST rationalisation ahead of the festive season improved affordability and consumer sentiment, according to TransUnion CIBIL’s December 2025 Credit Market Report. The Credit Market Indicator (CMI) rose to 99 in Q3 from 98 in the previous quarter, signalling a gradual improvement in overall credit market health.
Demand gains concentrated in consumption-led segments. Consumer durable loans, two-wheeler finance and auto loans recorded strong year-on-year momentum during the pre-festive period, lifting the CMI demand sub-index to 95 for the quarter ended September 2025 from 93 a year earlier.
An additional analysis of October trends showed a sharper festive uptick, with indexed demand growth for consumer durable loans rising to 189 in 2025 from 128 in 2024, while two-wheeler and auto loans also posted higher growth than last year.
Credit supply expanded alongside demand, supported by secured products and lending beyond large cities. The CMI supply index climbed to 97 in Q3 2025 from 91 a year ago, led by consumption loans (excluding credit cards) and gold loans. Semi-urban and rural markets continued to outperform, accounting for 61% of total credit supply during the quarter, as lenders leaned into regions with steady borrowing appetite.
Borrower profiles also shifted. New-to-credit consumers returned to growth, with their year-on-year expansion turning positive after a contraction last year. Younger borrowers under 35 drove much of the momentum, particularly in semi-urban and rural areas, where their growth rate doubled to 15% year-on-year. In metros and urban centres, growth among younger borrowers also improved after a decline in the previous year.
Asset quality remained broadly stable, though pockets of stress emerged. The CMI performance index increased to 105 in Q3 2025 from 100 a year earlier, indicating a steady delinquency picture overall. However, early delinquencies rose in micro loans against property (LAP) and small-ticket housing loans, prompting the need for closer monitoring of these portfolios.
“GST 2.0 supported consumer sentiment and credit demand during the festive period, but sustaining growth will require responsible lending and early risk identification,” said Bhavesh Jain, Managing Director and CEO of TransUnion CIBIL.
The report suggests that while policy support and festive demand have buoyed retail credit, lenders will need to balance expansion with prudent risk management—especially as borrowing deepens in emerging geographies and among first-time consumers.
Demand gains concentrated in consumption-led segments. Consumer durable loans, two-wheeler finance and auto loans recorded strong year-on-year momentum during the pre-festive period, lifting the CMI demand sub-index to 95 for the quarter ended September 2025 from 93 a year earlier.
An additional analysis of October trends showed a sharper festive uptick, with indexed demand growth for consumer durable loans rising to 189 in 2025 from 128 in 2024, while two-wheeler and auto loans also posted higher growth than last year.
Credit supply expanded alongside demand, supported by secured products and lending beyond large cities. The CMI supply index climbed to 97 in Q3 2025 from 91 a year ago, led by consumption loans (excluding credit cards) and gold loans. Semi-urban and rural markets continued to outperform, accounting for 61% of total credit supply during the quarter, as lenders leaned into regions with steady borrowing appetite.
Borrower profiles also shifted. New-to-credit consumers returned to growth, with their year-on-year expansion turning positive after a contraction last year. Younger borrowers under 35 drove much of the momentum, particularly in semi-urban and rural areas, where their growth rate doubled to 15% year-on-year. In metros and urban centres, growth among younger borrowers also improved after a decline in the previous year.
Asset quality remained broadly stable, though pockets of stress emerged. The CMI performance index increased to 105 in Q3 2025 from 100 a year earlier, indicating a steady delinquency picture overall. However, early delinquencies rose in micro loans against property (LAP) and small-ticket housing loans, prompting the need for closer monitoring of these portfolios.
“GST 2.0 supported consumer sentiment and credit demand during the festive period, but sustaining growth will require responsible lending and early risk identification,” said Bhavesh Jain, Managing Director and CEO of TransUnion CIBIL.
The report suggests that while policy support and festive demand have buoyed retail credit, lenders will need to balance expansion with prudent risk management—especially as borrowing deepens in emerging geographies and among first-time consumers.
