India’s credit ecosystem remains resilient despite the pandemic and the consumer credit market is projected to grow at a higher rate than most major economies globally, according to a report by Experian and Invest India.

Titled ‘A Review of India’s Credit Ecosystem’, it noted that the growth would be driven by a shift in India’s demography, a burgeoning affluent middle class ramping up private consumption, as well as growth in rural populations, all catalysed by technology.

It noted that NBFCs and fintech firms have transformed the lending landscape to cater to the financial needs of the consumers.

The data, which tracks India’s credit ecosystem from March 2017 to February 2021, highlights a v-shaped recovery across Indian markets, with a gradual and steady improvement in sourcing trends.

New sourcing crossed the pre-Covid-19 level in October 2020. However, sourcing volumes declined from January 2021 onwards, due to the second Covid-19wave and lockdowns being imposed.

It said that a remarkable recovery was observed across all unsecured credit products. Recovery of personal loans has been high in both low (sub Rs 1 lakh) and high (above Rs 5 lakh) ticket size segments while the recovery in higher ticket size loans is also improving steadily.

The credit portfolio has been resilient, and in February 2021, growth stood at eight per cent year-on-year for the portfolio of key products, lower than the 13 per cent observed for March 2020.

The pace of growth slowed down for all products, however, with unsecured products experiencing a faster year-on-year growth rate compared to secured loans.

Experian India Managing Director Neeraj Dhawan said: “The behavioural shift in Indian population has been tremendous just over the last five years. Consumerism has been growing in the previously untapped semi-urban and rural regions as millennials become the main driving force of the mass market.”

Noting that technological adaption is steep which has, in turn, created acceptance for new financial tools, he said: “The biggest beneficiary of this change is the credit market, which is evolving into a self-generating and self-sustaining one. In line with this trend, the risk appetite of traditionally conservative lenders is growing as the horizon of creditworthiness expands.”

Invest India Managing Director & CEO Deepak Bagla said: “India is making giant strides in financial inclusion. The rise in the affluent middle class and growth in the rural economy is changing consumer spending patterns and driving the bulk of India’s consumption growth.”

Additionally, rapid technological advancements have further expedited the growth of the credit lending ecosystem, he added.