In India’s credit ecosystem, retail loans, especially unsecured borrowing for consumer needs, have become an increasingly important part of financial life for many households.

Over the last decade, credit bureaus and lenders have seen a marked rise in demand for personal loans, two-wheeler loans, consumer durable finance and vehicle loans as consumers seek to purchase everything from electronics and appliances to vehicles and holiday travel.

A recent report by TransUnion CIBIL highlights how the GST rate rationalisation implemented in September 2025 (often referred to as “GST 2.0”) has boosted the demand for retail credit. The rationalisation, which trimmed tax rates on hundreds of items including vehicles and electronics, has improved affordability for consumers, encouraging them to borrow more.

Yet, amid rising loan demand, the composition of borrowers is shifting. CIBIL data reveals that younger borrowers, especially those under 35, are becoming more cautious, leading to a smaller share of loan enquiries from this segment. Meanwhile, delinquency rates, especially in unsecured and micro-loan segments, have shown signs of stress.

This article examines the causes and implications of these trends, how GST reform has spurred credit demand, why certain cohorts are cautious, and what emerging data on delinquencies means for lenders and borrowers alike.

GST Rate Rationalisation and Retail Credit Growth

The GST Council’s September 2025 rationalisation reduced tax rates on more than 350 goods and services, lowering prices on many consumer durables, vehicles and electronic goods. With lower retail prices, consumers felt more confident to borrow and spend, particularly in the festive season, a peak period for big-ticket purchases.

Lenders responded with increased loan offers and incentive campaigns, especially in two-wheeler loans, auto finance, and consumer durables (like TVs, phones and home appliances). This uptick in loan enquiries signalled renewed consumer confidence and an optimism defying the broader macroeconomic slowdown.

Table: Key Retail Loan Demand Trends (Post-GST Rationalisation)

Before we look deeper into borrower behaviour, here’s a snapshot of how retail credit demand and delinquency trends have moved in recent quarters:

Metric	Trend	Context
Retail Credit Demand	Up	Enquiries for auto & durable loans rose after GST cuts.
Share of Borrowers Aged 26–35	38% (down from ~40%)	Indicative of slight caution among younger cohorts.
Share of Borrowers Under 25	19% (down)	Fewer young first-time borrowers entering credit.
Growth in Credit-Active Consumers	~9%	Slower growth rate, partly due to preference for existing over new customers.
Delinquencies ↑ (2-wheeler loans)	+0.22 ppt to ~2.2%	Slightly elevated overdue loans.
Micro-LAP Delinquency	+0.45 ppt to ~3.3%	Growing stress in small-ticket property loans.

Table Summary: The overall direction is upwards for retail credit demand, particularly in secured loan categories like vehicle and durable finance, reflecting improved affordability post-GST reform. However, the share of young borrowers’ enquiries has declined and asset quality indicators like delinquencies in small-ticket categories have risen, signalling caution and emerging stress.

Young Borrowers Becoming Cautious — What the Data Shows

One of the more surprising insights from TransUnion CIBIL’s quarterly report is demographic change in loan enquiries:

Borrowers aged 26–35 made up 38% of retail loan enquiries in Q2 FY 2026, down from around 40% in comparable periods.
Those aged under 25 accounted for only 19%, also down year-on-year.
Conversely, the older cohort aged 36–55 saw an increased share of enquiries.

These shifts suggest that younger consumers, once the fastest-growing group of retail borrowers, are now more cautious about taking on new credit. The reasons may include:

Higher awareness of credit costs, driven by credit-score education and wider media coverage of debt challenges.
Slower growth in new-to-credit (NTC) borrowers, which is consistent with broader industry reports showing lenders tightening unsecured lending to first-timers.
Emerging delinquency risks, as young borrowers may be more exposed to unstable incomes or informal jobs. Independent data shows overall loan defaults, especially small-ticket digital and personal loans, have climbed to multi-quarter highs, with young and rural borrowers disproportionately affected.

Lenders appear to be responding by favouring existing customers over new, untested borrowers, a common strategy to manage credit risk while sustaining growth.

Delinquencies & Emerging Risks in Micro & Small Loans

While GST cuts boosted demand, asset quality indicators signal stress in certain segments:

Two-wheeler loans saw delinquencies (loans overdue over 90 days) increase by 0.22 percentage points to about 2.2%.
Micro-loan against property (Micro-LAP) delinquency rose by 0.45 percentage points to around 3.3%.

These elevated overdue figures are noteworthy because micro-loans and small secured products tend to reflect income volatility among lower- and middle-income borrowers. Independent credit-risk analyses also show delinquencies rising in fintech personal loans and small digital lending products, especially in tier-3 towns and rural India.

Another industry study points out that borrowers with overlapping microfinance and retail loans display higher delinquency rates compared to those with only one loan type.

Such patterns suggest that while overall retail credit growth is healthy, quality of that growth is uneven, with small-ticket and newer borrowers showing more signs of stress.

GST’s Broader Economic Impact on Loans & Consumer Sentiment

GST reform wasn’t solely about tax cuts: it was also designed to stimulate consumption and boost demand in a slowing economy. Multiple sectoral analyses indicate:

GST rationalisation has improved consumer affordability and sustained demand in discrete retail categories, especially vehicles and electronics.
Some GST rate changes are expected to lower retail inflation, easing living costs and indirectly improving consumers’ ability to service debt. A recent SBI report said GST reforms could trim inflation by roughly 35 basis points in FY 2025-26.
Lower GST from September also correlated with increased footfalls in malls and stronger festive buying trends, indicating consumers responded positively to price cuts.

At the same time, other credit reports show unsecured lending to new borrowers is declining, reflecting lender caution.

Opportunities and Cautions in Retail Credit

The evolving picture of retail credit in India is a mix of growth and caution:

GST-driven affordability has undeniably boosted demand for retail loans, particularly in secured consumer segments like vehicles and electronics.
Younger borrowers, once a major engine of new credit growth, are pulling back or being more cautious, which could signal both better financial awareness and apprehension about debt costs.
Asset quality concerns, particularly rising delinquencies in micro-loans and small secure products, show that not all credit growth is equally healthy.

For lenders, the challenge lies in balancing loan growth with prudence: engaging new borrowers without diluting credit quality. For borrowers, especially younger and first-time credit users, careful planning and understanding of credit costs will be essential in a landscape where access to credit is expanding but repayment behaviour is being closely monitored.