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Lenders Favor Prime Borrowers Amid AI Job Fears
1 Apr
Summary
- Banks increasingly lend to prime borrowers with scores above 730.
- New-to-credit customers' share dropped significantly to 16%.
- Gold loans now dominate retail lending by volume and value.
Lenders are increasingly focusing on borrowers with prime credit ratings, a trend that has intensified as job expansion in India becomes more uncertain due to AI's impact on repetitive tasks. Data from TransUnion CIBIL indicates that most new loan originations are concentrated among individuals with credit scores of 730 or higher. This shift also means a declining share for new-to-credit customers, now at 16% of total originations as of January 2026, down from 22% two years prior.
Despite a more risk-averse lending environment, the credit market's overall health has improved. The Credit Market Indicator (CMI) rose to 102 for the quarter ending December 2025. This improvement is largely attributed to enhanced asset quality, with delinquencies decreasing across most loan segments. The micro-loan against property segment remains an area of stress, though levels have stabilized.
On the supply side, the CMI saw a notable increase, propelled by a surge in gold loan volumes and values. Rising gold prices have encouraged consumers to take out larger gold loans, with the average ticket size growing substantially. Gold loans now constitute the largest segment of retail lending by both volume and value, second only to housing loans in outstanding balances.
