India’s retail credit market is changing rapidly as borrowers, lenders, and loan preferences continue to evolve. According to Bhavesh Jain, Managing Director and CEO of TransUnion CIBIL, products such as gold loans, consumer finance, and digital lending are driving this transformation. He shared insights on the latest trends in gold loans, new-to-credit borrowers, women borrowers, and credit card usage.
Gold Loans Are Growing at a Record Pace
Gold loans have become the fastest-growing retail credit product in India over the last four to six quarters. While home loans continue to have the highest outstanding loan amount, gold loans now rank second. The total Assets Under Management (AUM) of gold loans has reached nearly Rs 20 lakh crore, while the credit loss remains very low at around 0.3%.
Bhavesh Jain said the popularity of gold loans is driven by several factors. Indian households already own large amounts of gold, making it easy for borrowers to pledge it for loans. The loan approval process is also quick and simple. For lenders, gold loans are considered a secure lending product because the pledged gold acts as collateral in case of non-payment.
Young Borrowers Are Choosing Gold Loans
Gold loans are no longer limited to older customers or traditional borrowers. Younger people, including Gen Z, are increasingly choosing gold loans. According to Jain, one out of every five gold loans is now taken by young borrowers.
Earlier, gold loans were mainly popular in the five southern states. However, demand has now expanded to western and several northern states. Gold loans are also no longer limited to rural or semi-urban areas, as borrowers from urban locations are also opting for them.
One in Five Gold Loan Borrowers Already Has an NPA
One of the most significant findings shared by Bhavesh Jain is that one in every five gold loans is being given to borrowers who already have a Non-Performing Asset (NPA) on another loan account. This indicates that many borrowers with existing repayment issues are still using gold loans to meet their financial needs.
New-to-Credit Borrowers Are Entering Through Consumer Finance
The share of new-to-credit (NTC) borrowers has declined in recent years. Before the COVID-19 pandemic, they accounted for around 18–20% of all new loan originations. Today, this share has fallen to about 10–12%.
However, Jain said data shows that new-to-credit borrowers perform almost as well as near-prime borrowers. This should encourage lenders to continue offering credit to first-time borrowers.
Before the pandemic, agriculture loans and two-wheeler loans were the preferred entry products for new borrowers. Today, consumer durable loans, especially mobile phone financing, have become the most common first loan. Smartphones are now essential for work, education, entertainment, and business, making phone financing a popular choice, particularly among Gen Z customers.
Women Borrowers Prefer Gold Loans
A joint report by TransUnion CIBIL and NITI Aayog found that women borrowers have a strong preference for gold loans. More than one-third of all gold loans in India are taken by women.
According to Jain, women often own household gold, making it easier for them to use it as collateral. Women entrepreneurs also prefer gold loans because they are easy to obtain and involve a simple approval process.
Apart from gold loans, women are increasingly taking personal loans and business loans. The report also found that women who regularly monitor their credit reports and credit scores generally maintain better-quality loan portfolios.
The study also showed that women borrowers are actively using credit not only in cities but also in semi-urban and rural areas.
Credit Card Growth Has Slowed
Although credit cards have grown significantly over the past decade, growth has slowed in recent quarters. Over the last ten years, the number of credit card holders has increased from 1.4 crore to 5.2 crore, while the total number of credit cards has reached 10.7 crore. Outstanding balances have also increased nearly eight times to around Rs 3.1 lakh crore.
However, recent data shows that the number of cardholders has remained almost unchanged. This means that existing users are taking additional credit cards instead of many new customers entering the market.
First-Time Borrowers Prefer Other Loan Products
Credit cards are no longer the first choice for new-to-credit borrowers. Instead, first-time borrowers are entering the credit system through consumer finance loans, particularly mobile phone financing. Many later move to personal loans before eventually applying for credit cards.
Within the credit card segment, the share of first-time borrowers has dropped sharply from around 26% before the pandemic to only 7–8% today. Around 70% of newly issued credit cards are now going to customers who already own at least one credit card.
Different Types of Credit Card Users
TransUnion CIBIL has identified four major types of credit card users in India.
The first group consists of occasional users who mainly use credit cards for payments, rewards, and discounts. The second group is card-centric users, who rely heavily on credit cards as their primary borrowing tool. The third group includes diversified borrowers who use credit cards along with personal loans and other consumer credit products. The fourth group is high-exposure users who depend largely on unsecured credit and usually own three or more credit cards.
India Still Has Huge Potential for Credit Card Growth
India has around 60 crore people who have accessed credit at least once. Out of these, about 25 crore are active borrowers, but only 5.2 crore people currently own credit cards.
This means only about 25% of active borrowers have a credit card. In comparison, countries such as the United States, United Kingdom, Canada, and Hong Kong have credit card ownership rates of 70% to 95% among active borrowers.
Why Is Credit Card Growth Slowing?
According to Bhavesh Jain, consumers today have many alternatives to credit cards. For payments, people increasingly use UPI, which has more than 600 million acceptance points compared to only around 11 million credit card acceptance points.
For borrowing, customers also have access to personal loans, gold loans, and various consumer finance products. These alternatives have reduced the dependence on credit cards, resulting in slower growth over the last four to eight quarters.
Credit Card Portfolio Quality Is Improving
Despite slower growth, the quality of credit card portfolios has improved. Delinquency levels have declined from around 2% a year ago to 1.7% in the latest quarter. This indicates that credit card users are managing repayments better, leading to healthier portfolios for lenders.
