GST Cuts Lift Retail Credit Demand Across India, Auto & Consumer Loans Lead Growth

New Delhi: Cuts and rationalisation in the Goods and Services Tax (GST) have helped increase demand for retail loans in India. Better affordability has encouraged more people to borrow, leading to higher credit activity. This improvement is reflected in the Credit Market Indicator (CMI), which rose to 99 in the second quarter of FY25, compared to 98 in the previous quarter, according to a TransUnion CIBIL report released on Monday.

Growing Consumer Confidence

The report said rising demand for retail loans shows renewed consumer confidence and optimism in the market. The demand pillar of the CMI increased to 95 in the quarter ended September 2025, up from 93 in the same period last year. This growth was mainly driven by strong demand for vehicle loans and consumer durable loans such as refrigerators, washing machines and electronics.

Auto and Consumer Durable Loans Lead

Demand for consumer durable loans showed a sharp rise. The daily average indexed demand jumped to 189 in October 2025, compared to 128 in October 2024. Two-wheeler loan demand also increased strongly, rising to 272 from 249 during the same period. Auto loan demand improved as well, moving up to 133 from 115. These numbers show that people are spending more on vehicles and household goods.

Credit Supply Also Improves

The supply side of the credit market also showed improvement. The CMI for credit supply rose to 97 in the third quarter of 2025, from 91 in the same quarter last year. This growth was mainly driven by consumption loans, excluding credit cards, and gold loans.

Strong Growth in Secured Loans

Loans backed by assets such as home loans, auto loans and consumer durable loans showed positive momentum in the September 2025 quarter. This is notable because these segments had seen a decline in the previous year. Semi-urban and rural areas played a key role, accounting for 61 per cent of total credit supply during the quarter.

Opportunities and Risks for Lenders

TransUnion CIBIL’s Managing Director and CEO, Bhavesh Jain, said lenders should focus on areas with strong credit supply while studying regions with slower growth. He added that new-to-credit borrowers rose 5 per cent year-on-year, while borrowers under 35 years increased by 12 per cent. However, he cautioned that some stress is emerging in micro-LAP and small housing loans, even though overall asset quality remains stable.