A new TransUnion CIBIL study estimates that nearly 150 million consumers who are currently not credit active are potentially eligible to become retail credit borrowers. Tapping into this huge potential borrower market could provide significant growth opportunities for retail lenders and provide a major boost to the Indian economy.
The study estimates that the total population of credit-eligible consumers in India is roughly 220 million. Of this eligible population, only about one-third—72 million—are currently credit-active, meaning that they have a live account with a bank or lending institution. The remainder—nearly 150 million—are not currently credit active, but would meet the age and income requirements that would make them potentially attractive to lenders.
This group includes both consumers who were previously credit active but are currently dormant, and those who have never availed a retail loan or credit card. The addition of these consumers to the retail lending market could mean significant incremental growth opportunities for credit products such as credit cards, personal loans and consumer durable loans.
“After significant growth in retail lending over the past decade, many lenders and industry observers have asked whether the retail credit market is nearing the saturation point and could soon face a slowdown. Our study paints a much brighter picture for the industry,” said Yogendra Singh, Vice President of Research and Consulting for TransUnion CIBIL.
“Through our research, we were able to determine that millions of consumers who are potentially attractive to lenders are not currently borrowers. This untapped market presents an opportunity for sustained, prudent growth for lenders over the next five years and beyond. Lenders need to find ways to reach this untapped market, which likely has credit needs that are not being met currently.”
The TransUnion CIBIL study calculated that approximately 220 million consumers meet the target age range—from 20 to 69—and minimum income level, which is assumed as at least INR 250,000 per year, to be attractive to lenders for retail credit products. This addressable market size is forecast to continue to grow at a rapid pace, as more consumers enter the target age range and economic growth raises income levels. The study forecasts that the addressable market will increase by 14-16 million consumers per year, reaching an estimated 295 million by the end of 2022.
“As more consumers reach adult age and have disposable income, they will increasingly seek credit to help finance purchases of housing, vehicles, and household goods. As well, in an increasingly digital marketplace, they will want credit cards to help facilitate online transactions. These developments bode well for continued robust growth in the retail lending market,” continued Singh.
Other findings from the study were that household debt levels in India as a percentage of national income are modest in comparison to other emerging countries such as China, Brazil and South Africa. If India follows the growth trajectories of other countries, total household debt could increase from INR 37 trillion transunion.co at the end of 2017 to between INR 78 – 94 trillion by the end of 2022. This supports the conclusion that Indian households will have additional borrowing capacity and could continue to finance growing consumption levels.
“There is a tremendous growth opportunity for retail lenders who are seeking to expand their customer base and grow their business,” said Singh. “The economy will also benefit from the influx of millions of consumers into the credit market. Many of these consumers will be in a position to build their credit footprint and achieve more financial security in the coming years.”