TransUnion CIBIL Credit Market Indicator (CMI)

TransUnion CIBILCredit MarketIndicator (CMI)A comprehensive measure of retail lending health trends

November 2021

Preface

2

India’s retail lending market has gone through a rapid evolution over the last few years and has experienced a transformation in lender as well as consumer mind-set. Changes in economic and external market conditions have influenced the growth trajectory of retail lending. The onset of COVID-19 pandemic has caused volatility in the overall credit market conditions.

With the situation changing very frequently it becomes imperative for lenders and policy makers to get the right perspective of the market, so that they can take more informed decisions. TransUnion CIBIL is committed to fostering trust in the market by providing research based insights and data trends to all the stakeholders to support them plan their business strategies.

We reassert this commitment with the launch of Credit Market Indicator (CMI) - a comprehensive measure of retail lending health trends.

@2021 TransUnion CIBIL Credit Market Indicator

Contents

CMI

→ Introduction to CMI

→ Key Insights

→ Lender Implications

3@2021 TransUnion CIBIL Credit Market Indicator

4

CMI is a measure of consumer credit health trends that summarizes movements amongst demand, supply, consumer behavior, and performance metrics over time into a single indicator


CMI is built usingaggregate and depersonalizedconsumer credit data

5

• CMI considers the impact of hundreds of reported credit variables and identifies those that are most significant to the changes in consumer credit trends. • When selecting certain variables year-on-year (YoY) movements are analyzed to remove the effects of seasonality. • The statistical technique of Structural Equation Modelling (SEM) has been used to analyze the direct and indirect relationships between the key factors.• CMI is not a stationary index, hence the levels in itself are not indicative of the credit health. CMI number needs to be looked at in relation to the previous period(s) and not in isolation.• While CMI is impacted by macro-economic conditions, it is not built using macro-economic drivers.• CMI will be updated based on monthly refreshed data.


The relevant data elements are categorized under four pillarsthat interact with each other to compute CMI

Demand Supply Consumer Behavior Performance

6

• Application volume (inquiries)• Application distribution / share by: (consumer age, geography, CV score band, loan type)• Inquiries by live consumers in last, 3 / 6 / 12 months

• Originations (volumes and amount)• Distribution / share of originations by: (CV score band, loan ticket size, consumer age, geography, loan type) Approval rate

• Live Balances, Accounts and Consumers• Average outstanding balance per consumer / trade• Balance, Accounts and Live consumer distribution by: (CV score band, consumer age, geography, missed payment ratio, live trades, credit experience)

• Delinquency (30+, 60+, 90+, by balance, accounts, consumer)• Cure and roll forward rates (0 to 30, 30 to 60, 60 to 90, 90 to 120+, by balance and accounts)• Vintage Delinquency (30+, 60+, 90+ , at 6 months, 12 months)


Key Insights


ResilientLending Market 1 Recuperating

Demand & Supply2 Sustainable Portfolio Growth3


1

Resilient Lending Market


Mid 2017 to End of 2017

• Stronger economic growth • Entry of FinTechs and

new-age NBFCs

2018 to Early 2020• Moderating economic growth• NBFC liquidity crisis

Early 2020 Onwards • Impact of COVID-19 pandemic

India’s retail lending market is poised for strong growth owing totimely policy interventions and better adaptability by lenders

Source: TransUnion CIBIL consumer credit database 10

2016 to Mid 2017 • Slowing economic conditions

impacted credit growth and delinquencies.


CM

I Va

lue

The increase in April-2021 CMI is temporary and driven primarily by an exponential increase in inquiries and originations in April 2021 compared to a lower base of April 2020. Inquiry and Origination volumes increased YoY by 8.5 times and 5.2 times respectively in April 2021.August 2021 CMI value is provisional and subject to revision as additional data get reported to the TransUnion CIBIL credit bureau.

106

97

108

100

83

90

78

87

60

70

80

90

100

110

120

CMI for Last 5 Years Impact of exponential YoY increase in inquires and originations over lower base of Apr-20

Impact of first wave on demand and supply

Impact on delinquency post moratorium Resurgence in

demand and supply

Aug

-16

Nov

-16

Feb-

17M

ay-1

7A

ug-1

7N

ov-1

7Fe

b-18

May

-18

Aug

-18

Nov

-18

Feb-

19M

ay-1

9A

ug-1

9N

ov-1

9Fe

b-20

May

-20

Aug

-20

Nov

-20

Feb-

21M

ay-2

1A

ug-2

1

PSU lenders have led the resurgence, with PVT lenders andNBFCs also seeing strong recovery in the recent period


• PSU lenders experienced less of a negative impact on CMI in the earlier stages of the pandemic because they were amongst the quickest to resume lending post the initial lockdown. This resulted in a faster recovery of credit growth for PSU lenders.

• NBFCs saw less of a recovery after the first wave of the pandemic because of both higher levels of delinquencies and slower recovery in supply.

• In the most recent period both NBFCs and PVT lenders have seen a sharp recovery in credit health, primarily because they have now adapted to successfully manage the conditions prevalent post the second wave.


PSU PVT NBFC

106 106

97 94

8291

8881

88

70

80

90

100

110

120

Aug-

19

Nov

-19

Feb-

20

May

-20

Aug-

20

Nov

-20

Feb-

21

May

-21

Aug-

21

CM

I Va

lue

CMI by Lender Category for Last 2 Years

States where reduction in COVID-19 cases was faster have seencorresponding improvement in credit health


9180-90Portfolio <1%

Legend:

Aug-2021 CMIby States

J&K LA

HP

UT

UPRJ

GJMP

MH

TS

KA AP

ORCG

JH

BR

WB

SK

ASML

AR

MN

MZTR

TN PY

KL

PB

DLHR

GA

NL


Ch

an

ge

in C

MI

(Po

ints

)

MH: Maharashtra; GJ: Gujarat; DL: Delhi; WB: West Bengal; HR: Haryana; TS: Telangana;TN: Tamil Nadu; UP: Uttar Pradesh; RJ: Rajasthan; KA: Karnataka; AP: Andhra Pradesh; KL: Kerala

42 1 1

-1 -1-4 -4 -4

-7

-12

-5

-16

-12

-8

-4

0

4

8

MH GJ DL WB HR TS TN UP RJ KA AP KL

Aug-2021: YoY Change in CMI for Top 12 States

2

Recuperating Demand & Supply


Credit demand has recovered stronglyas economic activity has gained momentum


• Inquiry volumes have increased by 20% between Feb-2021 and Aug-2021 compared to a decline of -31% during the same months last year.• The increased demand is driven by consumption products (personal loans, credit cards, consumer durable loans). Inquiries for consumption products have increased by 29% between Feb-2021 and Aug-2021 compared to a decline of -42% during the same months last year.• Credit demand has further improved with the onset of festive season. Inquiry volumes have increased by 54% between Feb-2021 and Oct-2021 (-12% decline during same period in the previous year).


105

48

80 103

40

80

120

160

200

Aug

-19

Nov

-19

Feb-

20

May

-20

Aug

-20

Nov

-20

Feb-

21

May

-21

Aug

-21

CM

I Va

lue

CMI Demand for Last 2 Years

Lenders have shown better preparedness in extending creditduring the second wave, but are treading with caution


• Origination balances have increased YoY by 12.4% in Aug-2021 compared to a marginal increase of 0.2% in Aug-2020.• However, lenders seem to have become more cautious in extending credit. Approval rates declined by -4% between Aug-2020 and Aug-2021. • Similarly, share of new-to-credit (NTC) consumers in origination volumes has dropped to 15% in Aug-2021 from 18% in Aug-2020, indicating lesser risk appetite for this segment.


98

49 84 97

40

80

120

160

200

Aug

-19

Nov

-19

Feb-

20

May

-20

Aug

-20

Nov

-20

Feb-

21

May

-21

Aug

-21

-

CM

I Va

lue

CMI Supply for Last 2 Years

NBFCs are getting back on track with their lending activity

Source: TransUnion CIBIL consumer credit database 16@2021 TransUnion CIBIL Credit Market Indicator

CM

I VA

LUE

Inquiry volumes have increased by 3%, 17% and 29% for PSU lenders, PVT lenders and NBFCs respectively between Feb-2021 and Aug-2021 compared to 13%, -32% and -43% during the same months last year.

• In Aug-2021, origination balances have increased YoY by 19%, 25% and 25% respectively for PSU lenders, PVT lenders and NBFCs.

• Share of NBFCs in origination balances has improved to 25% in Aug-2021 from 22% in Aug-2020

20

60

100

140

180

220

Au

g-19

Nov

-19

Feb-

20

May

-20

Aug

-20

Feb-

21

May

-21

Aug

-21

Nov

-20

CM

I Va

lue

CMI Demand by Lender Categoryfor Last 2 Years

NBFC PVT PSU

20

60

100

140

180

220

CMI Supply by Lender Categoryfor Last 2 Years

NBFC PVT PSU

Au

g-19

Nov

-19

Feb-

20

May

-20

Aug

-20

Feb-

21

May

-21

Aug

-21

Nov

-20

3

Sustainable Portfolio Growth


Credit growth is gradually recovering consequent toimprovement in credit activity

Source: TransUnion CIBIL consumer credit database 18@2021 TransUnion CIBIL Credit Market Indicator

Aug

-19

Feb-

20

Nov

-19

May

-20

Aug

-20

Feb-

21

Nov

-20

May

-21

Aug

-21

CM

I Va

lue

CMI Consumer Behavior for Last 2 Years

102

87

73 78

60

80

100

120• Outstanding balances grew YoY by 8% in Aug-2021, slightly higher than 7% YoY growth in Feb-2021.

• Credit active consumers grew YoY by 7% in Aug-2021, compared to a YoY growth of 10% in Feb-2021.

• On a YoY basis, average debt levels have increased across different wallet profiles, possibly driven by impacted financial health of consumers.

Credit performance has been impacted as a result of deteriorationin consumer financial health – but not as severe as one expected

CMI Performance for Last 2 Years

Source: TransUnion CIBIL consumer credit database

Higher value of performance CMI reflects better performance

19

• Balance-level 90+ delinquencies have increased YoY by 96 bps in Aug-2021 to 4.37%.

• This increase in delinquencies is seen across all key products. Home loan has witnessed the least deterioration in delinquencies (up YoY by 46 bps in Aug-2021).

• Score distribution for credit active population highlights a YoY increase of about 4% in proportion of sub-prime consumers in Aug-2021.

CM

I Va

lue


95 96

70 78 80

100

120

60

Aug

-19

Feb-

20

Nov

-19

May

-20

Aug

-20

Feb-

21

Nov

-20

May

-21

Aug

-21

PVT lenders seem to have recalibrated their strategiesto maintain balance between growth and risk


• Outstanding balances of PVT lenders have increased YoY by 15% in Aug-2021 owing to faster pick-up in credit activity.

Credit performance has improved for PVT lenders and NBFCs post Feb-2021.


CMI Consumer Behavior by LenderCategory for Last 2 Years

CM

I Va

lue

PSU PVT NBFC

70

80

90

100

110

120

Aug

-19

Nov

-19

Feb-

20

May

-20

Aug

-20

Nov

-20

Feb-

21

May

-21

Aug

-21

Aug

-19

Nov

-19

Feb-

20

May

-20

Aug

-20

Nov

-20

Feb-

21

May

-21

Aug

-21

CMI Performance by LenderCategory for Last 2 Years

CM

I Va

lue

PSU PVT NBFC

60

80

100

120

Lender Implications


Refine business strategies

Perform custom benchmarking

Understand portfolio health

Lenders looking to take action on these insights can doso in several valuable ways

22

Assess the focus and effectiveness of your ongoing business strategies by leveraging market intelligence via a single indicator.

Create a portfolio-specific CMI using enhanced analytic capabilities, incorporating it as a key performance indicator against your peers and the market.

With consumer credit behavior and performance always evolving, conduct regular portfolio reviews to better evaluate your own portfolio health.

@2021 TransUnion CIBIL Credit Market Indicator@2021 TransUnion CIBIL Credit Market Indicator

TransUnion CIBIL

We call this Information for Good®.

© 2021 TransUnion CIBIL Limited All Rights Reserved.

India’s pioneer information and insights company, TransUnion CIBIL makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things.

We call this Information for Good.®

TransUnion CIBIL provides solutions that help create economic opportunity, great experiences and personal empowerment for millions of people in India. We serve the financial sector as well as MSMEs, corporate and individual consumers. Our customers in India include banks, financial institutions, NBFCs, housing finance companies, microfinance companies and insurance firms.

For more information visit: www.transunioncibil.com

We call this Information for Good.

Disclaimer: This Report is prepared by TransUnion CIBIL Limited (TU CIBIL). This Report is based on collation of information, substantially, provided by credit institutions who are members with TU CIBIL. While TU CIBIL takes reasonable care in preparing the Report, TU CIBIL shall not be responsible for errors and/or omissions caused by inaccurate or inadequate information submitted to it by credit institutions. Further, TU CIBIL does not guarantee the adequacy or completeness of the information in the Report and/or its suitability for any specific purpose nor is TU CIBIL responsible for any access or reliance on the Report and that TU CIBIL expressly disclaims all such liability. This Report is not a recommendation for rejection / denial or acceptance of any application nor any recommendation by TU CIBIL to (i) lend or not to lend; (ii) enter into or not to enter into any financial transaction with the concerned individual/entity. The user should carry out all the necessary analysis that is prudent in its opinion before making any decisions based on the Information contained in this Report. The use of the Report is governed by the provisions of the Credit Information Companies (Regulation) Act, 2005, the Credit Information Companies Regulations, 2006, Credit Information Companies Rules, 2006. No part of this Report should be copied, circulated, published without prior approvals.


TransUnion CIBIL Credit Market Indicator (CMI)

Documents

Transcript of TransUnion CIBIL Credit Market Indicator (CMI)