Just three Indian states account for 40% of all the country’s retail loans: Report

• Maharashtra, Karnataka and Tamil Nadu accounted for 40% of India’s retail loans at the end of the April-June quarter, according to a report by TransUnion CIBIL.
  
• Maharashtra, which is India’s richest state by GDP, alone accounts for more than 20% of all retail balances, with ₹5.5 trillion in outstanding retail loans.
  
• Between June 2017 and June 2018, aggregate retail loans rose by 27% owing to the strong demand for credit cards and personal loans.
  

As credit cards have become more popular and Indian banks have increasingly relied on retail loans to supplement a slowdown in lending to the corporate sector in recent years, Indian households have been taking on a lot more credit. And now, a report from TransUnion CIBIL, a credit scoring agency, shows where all that credit is concentrated.

Just three Indian states - Maharashtra, Karnataka and Tamil Nadu - accounted for 40% of all of the country’s retail loans at the end of the April-June quarter, despite representing a fifth of India’s population. Maharashtra, which is India’s richest state by GDP, alone accounts for more than 20% of all retail balances, with ₹5.5 trillion in outstanding retail loans. Meanwhile, Tamil Nadu and Karnataka account for ₹2.78 trillion and ₹2.75 trillion worth of retail balances, respectively.

These findings indicate the relative lack of aversion to credit in urbanised parts of the country. However, retail loans in Tier-III towns and villages around India are set to increase as banks, especially public-sector banks, focus on rural penetration and payment banks, such as the one run by the Indian Post, expand operations. Additionally, with the advent of credit scoring agencies, banks will only become more confident about lending to people outside large cities.

In accordance with recent data from the Reserve Bank of India (RBI), the report also noted a significant increase in retail loans in the past year. Between June 2017 and June 2018, aggregate retail loans rose by 27% to ₹28 trillion. Credit cards and personal loans, in particular, were the fastest-growing retail segments, with balances in both growing at over 40% from last year.

This growth in retail loans was largely complemented by a stable level of delinquency rates. However, at 3% year-on-year, default rates were relatively high in the property lending segment. This was offset by a reduction in defaults on automobile loans and personal loans.

Finally, the report noted that India’s retail lending market crossed a significant threshold in the April-June quarter. The total amount of active retail borrowers cross 100 million for the first time over the period, boosted by a 30% rise in loans to new borrowers.