The Goods and Services Tax (GST) cuts led to an increase in people taking on more loans to make purchases, with data from credit bureau firm TransUnion CIBIL showing that demand for consumer durable loans was significantly higher between Dussehra and Diwali compared to the same period last year.
Splitting the last few months of 2025 into three periods – the 19 days after the GST cuts were announced and before they were implemented on September 22, the 10-day pre-festive period after their rollout and before Dussehra, and the 20 days between Dussehra and Diwali – the credit bureau found that demand for consumer durable loans was incrementally higher by around one-and-a-half times in the festival window compared to a year ago. This, TransUnion CIBIL said on Monday, was indicative of “renewed consumer confidence”
“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. While fostering and sustaining this credit demand is crucial, it is equally important to promote responsible borrowing practices,” Bhavesh Jain, Managing Director and Chief Executive Officer of TransUnion CIBIL, said.
The bureau’s Credit Market Indicator, or CMI, rose to 99 in July-September from 98 the previous quarter, although it remains lower than the year-ago quarter’s reading of 100. The CMI summarises the movement of a variety of indicators that measure credit demand, supply, consumer behaviour, and performance. A higher CMI reading is indicative of improving credit market health.
The pick-up in consumer loans will add to households’ indebtedness. As at the end of 2024-25, households’ financial liabilities were up 13 per cent year-on-year, while their financial assets were 10 per cent higher. A rapid rise in consumer loans had forced the Reserve Bank of India (RBI) back in November 2023 to tighten norms governing these loans, especially unsecured credit, made by banks and non-banks. As per latest RBI data, banks’ personal loans were up 14 per cent as at the end of October compared to the 30 per cent growth registered in October 2023.
Apart from consumer durable goods, TransUnion CIBIL said on Monday that people also sought to borrow more to buy two-wheelers.
First-time borrowers usually begin by taking two-wheeler loans. A rise in two-wheeler purchases is also typically associated with improvement in the rural economy.
According to the Society of Indian Automobile Manufacturers (SIAM), a combination of higher economic activity, improved affordability, resilient rural mobility demand, and the GST rate cuts helped boost two-wheeler sales by 7.4 per cent year-on-year in July-September. Sales growth declined sharply to 2.1 per cent in October before jumping to 21.2 per cent in November, per latest SIAM data.
However, the two-wheeler segment continued to see an increase in payment pressures, or defaults. The segment has seen rising stress, with CareEdge Ratings noting in October that the gross bad loan ratio for non-bank finance companies’ two-wheeler portfolio had increased to 3.7 per cent as at the end of 2024-25 from 3.1 per cent a year ago as the share of on-time payments fell by 290 basis points to 86.8 per cent.
The continued rise in stress in two-wheeler loans comes at a time when the rural economy is doing well due to good rains and low inflation. However, Bhavesh Jain of TransUnion CIBIL said the rise in delinquencies had more to do with borrower profiles rather than the geography at an all-India level.
