Retail Credit Market Witnesses Slowdown Despite RBI Rate Cuts

The retail credit market shows signs of weakening as the growth of new loan originations decelerated to 5% in March 2025, compared to 12% in the previous year. This decline occurred in spite of a 25 basis point reduction in the RBI's benchmark lending rate, set at 6.25% as of February.

According to TransUnion CIBIL's June 2025 Credit Market Report, the Credit Market Indicator (CMI) fell to 97, marking a two-year low. The dip in the CMI underscores a declining state in the credit market, which observed decreased enthusiasm particularly among consumers 35 years and younger.

Although the demand among younger consumers fell, some resurgence in credit market performance is noted with month-over-month drops in credit card delinquencies from January to March 2025. Furthermore, there is a shift towards high-value loans, as evident from a rise in home and two-wheeler loans above Rs 1 crore and Rs 1.5 lakh respectively.

(With inputs from agencies.)