Retail Credit Demand Buoyed by GST Rationalization and Festive Season Sentiment in Q3 2025
The Goods and Services Tax (GST) rationalisation in September 2025, implemented ahead of India’s festive season, appears to have supported growth in the retail credit market. Improved affordability encouraged retail borrowers to seek higher credit, resulting in an increase in the Credit Market Indicator (CMI).
According to TransUnion CIBIL’s December 2025 Credit Market Report, the CMI rose to 99 for the period July–September 2025, up from 98 in April–June 2025.
Understanding the Credit Market Indicator (CMI)
The CMI is a comprehensive measure that aggregates multiple data elements on a monthly basis to assess changes in overall credit market health. It is structured around four key pillars:
Demand
Supply
Consumer Behaviour
Performance
These pillars are combined into a single, composite indicator, while also allowing for individual pillar-level analysis. A higher CMI reading indicates improving credit market health, while a lower reading signals a decline.
Chart 1: Credit Market Indicator (CMI), September 2023 – September 2025
GST 2.0 Drives Credit Demand and Consumer Confidence
The rationalisation of GST (commonly referred to as GST 2.0) appears to have played a significant role in stimulating credit demand among retail consumers. This reflects a strong alignment between policy reforms and consumer behaviour, underscoring the resilience of India’s retail credit ecosystem.
As lenders respond to this momentum, maintaining a balance between credit expansion and responsible lending will be critical to sustaining long-term financial health.
“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. Lenders must engage with consumers at multiple touchpoints to ensure financial discipline and sustainability to support healthy growth of credit in India,”
— Mr. Bhavesh Jain, Managing Director and CEO, TransUnion CIBIL
Revival in Credit Demand Led by GST 2.0 and the Festive Season
Rising retail loan demand signalled renewed consumer confidence and market optimism. This was particularly evident in the following segments during the pre-festive period (post-GST 2.0 implementation):
Two-wheeler loans
Auto loans
Consumer durable loans
These segments recorded strong incremental year-over-year (YoY) growth. Consequently, the CMI for demand increased to 95 in the quarter ended September 2025, compared to 93 in the quarter ended September 2024.
Chart 2: CMI – Demand, September 2023 – September 2025
Festive Season Demand: October 2025 Analysis
While the CMI captures the period from July to September 2025, TransUnion CIBIL additionally analysed credit demand trends for October 2025 to assess the early impact of GST 2.0 and the festive season on consumer credit behaviour.
The analysis compared festive-period demand in 2024 and 2025, focusing on consumer durable loans, two-wheeler loans, and auto loans. Indexed growth trends (indexed to 100 for the January–June period of each year) showed the following:
Consumer durable loans: Indexed demand rose to 189 in 2025 from 128 in 2024
Two-wheeler loans: Indexed demand increased to 272 in 2025 from 249 in 2024
Auto loans: Indexed demand rose to 133 in 2025 from 115 in 2024
Credit Supply Driven by Secured Assets and Non-Metro Regions
The CMI for supply increased to 97 in the third quarter of 2025, compared to 91 in the same quarter of 2024. This growth was primarily driven by:
Consumption loans (excluding credit cards)
Gold loans
Credit supply across secured asset categories—including home loans, auto loans, and consumer durable loans—showed positive momentum in the September 2025 quarter, following a decline in the previous year.
Graph 1: Origination Volumes by Product Type
Semi-Urban and Rural Regions Lead Credit Growth
Semi-urban and rural regions continued to outperform metro and urban areas in both credit demand and supply, consistent with trends observed in the previous quarter. During the quarter ended September 2025:
Semi-urban and rural consumers accounted for 61% of overall credit supply
“For lenders, this presents an opportunity to focus on pockets where supply is strong, while simultaneously analysing regions showing muted growth to identify underlying challenges. Leveraging granular data and insights will be key to aligning strategies with evolving consumer needs and ensuring balanced credit expansion,”
— Mr. Bhavesh Jain, Managing Director and CEO, TransUnion CIBIL
Emerging Geographies and Younger Borrowers Drive Growth
Emerging geographies witnessed higher credit growth, supported by increased participation from new-to-credit and younger borrowers:
The year-over-year growth rate among new-to-credit borrowers rose by 5% in the September 2025 quarter, following a 14% YoY decline in the same quarter last year
This growth, while lower than the 17% YoY increase recorded in September 2022, confirms a sustained recovery
Among consumers below 35 years of age, the growth rate increased from 3% YoY in the September 2024 quarter to 12% YoY in September 2025
Younger borrowers in semi-urban and rural areas continued to play a key role in driving this momentum, reinforcing the importance of emerging markets in India’s evolving credit landscape.