How GST 2.0 and Festive Cheer Fueled a Retail Credit Boom in India

The Credit Market Indicator (CMI), a composite measure of credit market health, rose to 99 in the September 2025 quarter from 98 in the preceding quarter, reflecting improved demand, supply conditions and stable asset quality. The uptick followed the GST rationalisation introduced in September 2025, commonly referred to as GST 2.0, which enhanced affordability across key consumer segments.

Vehicle finance, particularly two-wheeler and auto loans, along with consumer durable loans, recorded strong year-on-year growth in the pre-festive period. The CMI for credit demand increased to 95 in the quarter ended September 2025, up from 93 a year earlier.

TransUnion CIBIL's analysis showed a sharper festive season impact compared with the previous year. Daily average demand for consumer durable loans surged to an indexed level of 189 in 2025 from 128 in 2024. Two-wheeler loan demand rose to 272 from 249, while auto loan demand increased to 133 from 115 over the same period.

Credit supply also improved, with the CMI for supply rising to 97 in the September 2025 quarter from 91 a year earlier. Growth was led by secured lending products such as home loans, auto loans, consumer durable loans and gold loans. Semi-urban and rural regions continued to outperform metro and urban areas, accounting for 61% of total credit supply during the quarter.

New-to-credit borrowers and younger consumers played a growing role in credit expansion. The year-on-year growth rate of new-to-credit consumers rose by 5% during the quarter, reversing a decline seen last year. Borrowers under the age of 35 recorded a 12% year-on-year growth, with participation particularly strong in semi-urban and rural markets.

"GST 2.0 was a much-needed step to stimulate economic growth, and its positive impact is evident in the improvement of consumer sentiment and the upward trend in credit demand," said Bhavesh Jain, Managing Director and Chief Executive Officer of TransUnion CIBIL. He added that lenders must balance growth with responsible lending practices to ensure long-term sustainability.

Overall asset quality remained stable, with the CMI for performance rising to 105 in the September 2025 quarter from 100 a year earlier. However, early signs of stress emerged in select segments. Delinquencies increased in micro-loans against property and small-ticket housing loans, indicating the need for closer monitoring of these portfolios.

"While overall asset quality remains stable, recent trends indicate emerging stress in specific loan segments," Jain said, noting that proactive risk assessment and borrower engagement would be critical to maintaining portfolio health.

- ANI