Half of India's working population credit active: Report

Half of the country's working population of 400 million people is credit active, having at least one loan or credit card, a report by a credit information company (CIC) said on Tuesday. Credit institutions are fast approaching a saturation level in new customers as over half of the borrowers are from the existing customer base of a bank, the report by Transunion CIBIL said.

India's overall working population was estimated to be at 400.7 million as of January 2021, while the retail credit market has 200 million unique individuals who are credit active, it said. It can be noted that for long, there have been concerns about borrowers ending up in the traps of usurious money lenders who are not regulated and efforts have been mounted to deepen the access to finance. Over the last decade or so, reverses faced on the corporate lending side made banks prefer retail credit but concerns are being raised over the segment's resilience after the pandemic.

The data from the CIC said there is an addressable market of 400 million people aged between 18-33 years in rural and semi-urban areas and pointed out that the credit penetration in this segment is only 8 per cent. In the new to credit (NTC) universe, there is a higher preference for products including personal loans and consumer durable loans in the segments of under-30 years and ones residing outside tier-I cities, it said.

The composition of women, however, continues to be much lower in the NTC segment, it said, pointing out that the composition of female borrowers was only 15 per cent in auto loans, 31 per cent in home loans, 22 per cent in personal loans and 25 per cent in consumer durable loans. The CIC's data also suggests that NTC consumers demonstrate higher loyalty to the credit institution that has provided them their first credit opportunity, the report said.

Borrowers also tend to prioritise payment on the first credit facility over the second in times of financial stress, it said. "Identifying emerging NTC consumers across segments and enabling access to financial opportunities for them is vital for driving economic resurgence and sustainable financial inclusion in our country," the CIC's managing director and chief executive Rajesh Kumar said.

He also added that lenders can assess credit risk associated with NTC customers as well with a product of the CIC for improving turnaround time and reducing cost of acquisition. The 'CreditVision NTC' scoring model is based on an algorithm that uses application and enquiry information of the borrower to help better assess their eligibility.