Growth in credit score access by individuals is trailing the jump in personal loans over the last few years by a wide margin, despite regulatory moves to provide credit information report free every year, India's largest credit information company (CIC) said on Thursday. As against a 23-times growth in personal loans under Rs 25,000 in 2020, as against 2017, the number of consumers checking their credit scores has grown only three times in 2020 when compared to 2018, Transunion Cibil said in a report.
In September 2016, the Reserve Bank of India had announced that starting 2017, all the CICs should give individuals a free access to the credit scores/report at least once every year by requesting for it, given the importance of the credit report in an individual's financial matters.
In the report done jointly with online ads and search giant Google, the CIC said there has been a manifold increase in credit awareness and consumption, which also includes doubling in the number of times a consumer checks credit score in the two years to 2020.
It also said that small-ticket lending is a reality, which cannot be ignored, saying credit under Rs 25,000 accounted for 60 per cent of the overall personal loan originations as of the December quarter of 2020.
Nearly three-fourths of the small ticket loans are now originating outside the tier-I cities, it added.
It also found that the COVID-19 has shifted demand for consumer credit online, and said that there has been an increase in the credit products purchased online because of the pandemic.
The report identifies multiple new and under-tapped segments of credit demand, which are distributed across loan product constructs, geographies, credit score-based risk segments, end-use requirements, and borrower profiles.
In 2020, 49 per cent of first-time borrowers were less than 30 years old, 71 per cent were based in non-metro locations, and 24 per cent were women, the report said.
A 2.5 times surge in searches for loans from non-Tier 1 cities has been observed than from tiered cities across 2017-2020, it added.
Growth in searches for car loans between the two halves of 2020 grew the fastest at 55 per cent, followed by home loans with 22 per cent growth, according to the report.
"Consumer credit demand and access have undergone a paradigm shift over the last few years, with the post-pandemic circumstances having further accelerated this change," Cibil's managing director and chief executive Rajesh Kumar said.
With lending decisions also powered by data, lenders are investing in technology automation, machine-learning powered scorecards, and analytical models to rapidly scale sustainable business growth in today's dynamic market, according to the report.
"With more and more consumers now coming online, the demand for credit has also dispersed and moved outside of predictable demographic pockets. The traditional customer contact model is constrained in locating, reaching, and engaging these new customers, particularly those beyond tier 1 cities," Google India's director Bhaskar Ramesh said.