Growth in access to credit scores lags personal loans: report
The growth in access to credit scores by individuals has been significantly lower than that of personal loans in recent years, despite regulatory measures to provide a free credit reporting report each year, the India’s largest credit information company (CIC). Compared with a 23-fold growth in personal loans of less than Rs 25,000 in 2020, compared to 2017, the number of consumers checking their credit scores increased only three times in 2020 compared to 2018, said Transunion Cibil in a report.
In September 2016, the Reserve Bank of India announced that starting in 2017, all CICs should give individuals free access to credit scores / reports at least once a year upon request, given the importance of the credit report in the life of an individual. financial matters.
In the report produced in conjunction with online ads and search giant Google, CIC said there has been a dramatic increase in awareness and consumption of credit, which also includes the doubling of the number of times a consumer checks their credit rating in the two years leading up to 2020.
He also said that low cost loans are a reality, which cannot be ignored, claiming that loans below 25,000 rupees accounted for 60% of total personal loans in the December 2020 quarter.
Almost three-quarters of small loans now come from outside of Tier I cities, he added.
He also found that COVID-19 altered demand for consumer credit online and said there had been an increase in credit products purchased online due to the pandemic.
The report identifies several new and under-exploited segments of credit demand, which are distributed among loan product constructions, geographies, risk segments based on credit rating, end-use requirements and borrower profiles.
In 2020, 49% of first-time borrowers were under 30, 71% were based in non-metropolitan areas and 24% were women, according to the report.
A 2.5-fold increase in loan searches in unranked 1 cities was observed compared to ranked cities over the period 2017-2020, he added.
Growth in auto loan searches between the two semesters of 2020 grew the fastest at 55%, followed by home loans with growth of 22%, according to the report.
“The demand for and access to consumer credit has undergone a paradigm shift in recent years, as post-pandemic circumstances have further accelerated this shift,” said Rajesh Kumar, CEO and Managing Director of Cibil.
With lending decisions also fueled by data, lenders are investing in the automation of technology, machine learning-based dashboards and analytical models to rapidly scale sustainable business growth in the dynamic market of today, according to the report.
“With more and more consumers going online now, the demand for credit has also dispersed and out of predictable demographic pockets. The traditional customer contact model is forced to locate, reach and engage these new customers, especially those beyond Tier 1 cities, ”said Google India director Bhaskar Ramesh.
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