Daijiworld Media Network - Mumbai

Mumbai, Sep 24: Credit activity across India's semi-urban and rural regions continued to gain traction during April–June 2025, reflecting sustained consumer demand beyond metropolitan centers, even as overall credit demand from younger borrowers (aged 18–35) saw a slowdown, according to the latest TransUnion CIBIL report released on Wednesday.

While youth demand cooled — with loan originations in the 18–35 age group growing at just 6% year-on-year compared to 9% during the same period last year — rural and semi-urban areas recorded a robust 9% annual growth in loan originations, signaling resilient consumption and access to finance outside traditional urban strongholds.

This shift comes as India anticipates a boost in festive spending, aided by recent Reserve Bank of India rate cuts and reductions in GST rates — all of which are expected to further fuel lending momentum. The share of young borrowers in total credit demand dropped to 56% in Q2 2025, down from 58% a year earlier, with much of the decline concentrated in urban and metro markets where lenders have reported a 3% dip in originations from this segment over the past two years.

In contrast, semi-urban and rural markets saw a particularly strong rise in personal loan demand, which grew 15% year-on-year — outperforming other products like gold loans (7%) and consumer durable loans (9%) in these regions. This reflects a rising appetite for unsecured credit and improved financial access in Tier 2 and Tier 3 towns.

Home loans also showed signs of recovery, with origination volumes rising 2% and value growing 6% year-on-year — a notable reversal from the 3% volume decline seen during the same period in 2024. However, two-wheeler loans saw a muted performance, with volumes dropping 1% and value growth slowing sharply to 3% — a significant decline from the 15% and 21% jumps, respectively, seen a year ago.

Commenting on the evolving credit landscape, TransUnion CIBIL MD & CEO Bhavesh Jain said: “India’s credit market is demonstrating maturity, with semi-urban and rural areas leading the way in growth, and a strategic shift toward more secured lending products. These trends support the narrative of sustainable and inclusive economic expansion.”

While credit card adoption among young consumers fell year-on-year, personal loans, gold loans, and consumer durable finance remain entry points into the credit system for this demographic. The report highlights that as younger borrowers advance through life stages, they tend to gravitate toward longer-term, secured credit products — a transition that reflects both changing life needs and improved financial literacy.

Jain noted that the recent softness in youth credit demand may be a short-term correction, potentially influenced by rising financial caution. “It’s a reminder of the importance of equipping young borrowers with tools and education to build strong credit profiles early in their financial journeys,” he said.

With the share of loan originations from semi-urban and rural borrowers inching up by one percentage point to 61% in Q2 2025, the report concludes that lenders have a clear opportunity to deepen their presence in non-metro markets. Tailored financial products, digital outreach, and support for responsible credit behavior could help institutions tap into these resilient demand pockets while reinforcing long-term financial inclusion.