First-time borrowers expand as consumer durable, gold and microfinance loans grow

Institutional credit penetration among first-time borrowers is deepening, driven by easy access to consumer durable loans, expansion of gold loans and microfinance, showed credit information bureau data.TransUnion Cibil, India's largest credit information company, pegged the credit eligible population at 890 million as of this March. About 74% of them took credit at some point in their lifespan while 13% are first time borrowers.The share of eligible Indians availing credit at least once more than doubled to 74% this March from 35% in March 2017.Consumer durable loans are the leading entry point for new-to-credit customers who take consumption-related loans, accounting for about 46% of originations to first-time borrowers by volume in the first quarter of this fiscal year, followed by gold loans at 18.3%, CRIF High Mark said in a report.India is witnessing a rapid rise in access to consumer durable loans backed by expansion of digital lending platforms, point-of-sale financing and retailer partnerships.Microfinance loans are another entry point for new-to-credit customers.CreditAccess Grameen, the country's largest non-banking financial company-microfinance institutions (NBFC-MFI), added about 980,000 borrowers, with 38% being new-to-credit, said Ganesh Narayanan, managing director.Several other NBFC-MFI, which had either stopped or slowed lending to the new-to-credit segment at the peak of the sectoral asset quality stress, are now raising their stakes with first time borrowers, according to chief executives.New-to-credit customers are those who don't have prior borrowing history or footprint in the credit information bureau.Within the consumption loan basket, personal loans came third with an 18% share in terms of contribution to creating accessibility to first time borrowers. Two-wheeler loans accounted for 11% of the total in the first quarter, CRIF High Mark data showed.Credit penetration beyond the top 100 locations also deepened, raising the access to institutional credit for all. Two-wheeler loans recorded the highest penetration at 53% beyond the Top 100 cities, while consumer durable penetration rose to 43.5% in Q1 FY27 from 40.8% a year prior.Overall, India's retail credit portfolio expanded to ₹179 lakh crore in the June quarter, clocking a 19.2% year-on-year growth. Gold loans recorded the highest increase at 62.2%, followed by consumer durable loans at 36.6%, sole-proprietor loans at 24.4%, and auto loans at 18%.

Consumer durable loans are leading new-to-credit customers into institutional borrowing. Gold loans and microfinance also significantly contribute to this growing credit access. Institutional credit penetration is expanding beyond major cities into smaller locations. India's retail credit portfolio has seen substantial year-on-year expansion. This trend indicates increasing financial inclusion for many Indian citizens.