New to Credit Loans Experience Decline in Q1 as Lenders Adopt Cautious Approach

In a recent report, Transunion Cibil highlighted a decline in the share of new-to-credit (NTC) borrowers during the June quarter. The report showed that only 16% of loan originations were classified as NTC, compared to 18% in the same period last year and 20% in 2023. This drop is attributed to lenders adopting a more cautious approach.

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The report also noted a decrease in the growth of credit-active consumers, which fell to 9% for Q1FY26 from 15% in the previous year. This trend may raise concerns about financial inclusion. Additionally, there was a slight increase in repayment stress, with more downgrades observed in the prime segment compared to the previous year.

Credit Score Migration and Asset Quality

During the three months leading to June, 25% of credit score movements were downgrades, up from 23% last year. Meanwhile, upgrades dropped to 29% from 31%. The report also mentioned a slight rise in delinquencies for consumer durable loans among recent originations.

Despite these challenges, asset quality improved across most segments except for two-wheelers and credit cards, which experienced increased stress. The report suggests that lenders are focusing on maintaining asset quality amid changing market conditions.

Retail Credit Demand and Regional Trends

Retail credit demand from younger consumers declined during the quarter ending June 2025. Growth in loan originations for this demographic slowed to 6%, down from 9% last year. However, demand in semi-urban and rural areas contributed positively to overall book expansion.

The Managing Director and Chief Executive of CIC, Bhavesh Jain, commented on India's evolving credit landscape. He noted resilience in semi-urban and rural demand, a strategic shift towards secured lending, and stable portfolio performance as key factors shaping the market.

The report underscores the importance of monitoring these trends closely. It highlights how shifts in borrower behaviour and lender strategies can impact financial inclusion and overall market dynamics.

With inputs from PTI