Though demand for loans from individuals continues unabated, delinquencies on loans especially two wheeler loans, loan against property (LAP) and personal loans have increased year on year, data from credit monitoring agency Transunion Cibil has showed. Loans due past 90 days, described as NPAs in banking parlance have increased 140 basis points year on year in the two wheeler segment, 30 basis points in the LAP segment and 11 basis points in the personal loan segment, Transunion Cibil said in a new report released on Wednesday.

Delinquencies in the LAP segment remain highest at 4.14% in November 2021, up 30 basis points from a year ago. One basis point is 0.01 percentage point. Loans due past 90 days in the two wheeler segment are also high at 3.64%, up 140 basis points. Consumer durable loan delinquencies are the third highest in the individual segment at 2.81% in November 2021 up 1 basis point year on year. Delinquencies in the credit card segment have eased sharply by 77 basis points to 2.22%.

Analysts said that the delinquency rates, though higher than last year, are still within limits. “Within unsecured, stressed loans are high in micro finance, followed by personal loans and credit cards. But there are no alarm bells as yet because it is still within range. In the secured category too the delinquencies are pretty benign. Moreover most banks are sitting on excess provisions which can be used in case of any uptick,” said Manish Ostwal, analyst at Nirmal Bang securities. Cibil also said credit performance of banks has been stable through 2021.

Overall, credit demand continued to grow with inquiry volumes—a measure of consumers applying for new credit, up 97% for consumer durable loans, 80% for personal loans and 33% in January 2022 year on year after a 10% decline recorded in January 2021.

“Despite the third wave of the pandemic, India’s retail credit market continued to exhibit an accelerated growth trajectory, with consumer demand outlasting the festive season. This growth coupled with the fact that credit performance remained stable bodes well for the resurgence in India’s credit market.” Rajesh Kumar, CEO Transunion Cibil said.

Retail loan demand is being driven by consumer durable and unsecured loans. With public sector banks taking the lead, the state of Tamil Nadu witnessed highest growth with delinquencies controlled in most segments except two wheeler loans, the report showed. Inquiry volumes increase 97% for consumer loans and 80% for personal loans. However, approval rates in personal loans, two wheeler loans, auto loans, LAP and credit cards are lagging versus last year indicating caution by lenders. Downgrades have increased to 30% from 26% in November 2020 “possibly driven by inability of consumers in this segment to pay their debt,” Transunion Cibil said.

While public sector banks led the resurgence in credit growth, Private and NBFCs have scaled significantly through the second half of calendar year 2021, according to credit market . The credit market indicator (CMI) a benchmark for gauging credit health of retail loans – by lender category reflects rapid scaling of growth in demand as well as supply by Private Banks and NBFCs, Transunion Cibil said.

Among the states, Tamil Nadu recorded the largest improvement in the credit market indicator in November 2021, up eight points . Delhi posted seven points improvement in CMI. It was up 6 points for Gujarat.