Impact of Mobile Phone Purchases on Two-Wheeler Loan Default Rates
MUMBAI: Consumer durable loans are playing a crucial role in shaping credit histories for younger borrowers, leading to a significant decline in two-wheeler loan delinquencies. According to TransUnion CIBIL, delinquencies fell to a seven-year low of 1.4% in June 2026, down from 2.7% in June 2019. First-time borrowers represented 39% of two-wheeler loan originations in the first half of 2026, a decrease of 19 percentage points from pre-pandemic levels.
The report, titled “Shifting Gears 2026: Credit Drives Today’s Mobility,” indicates that 43% of borrowers now have more than two years of formal credit history, an increase from 27% in 2019. Additionally, 18% of borrowers possess less than two years of credit history, suggesting that over 60% of borrowers have established credit records.
Impact of Consumption-led Borrowing
Consumption-led borrowing has contributed to this trend. Nearly one-third of two-wheeler borrowers had consumption credit products in their credit histories during the first half of 2026, up from 22% in the same period of 2019. Consumer durable loans were present in the histories of 18% of borrowers, while gold loans accounted for 16%, credit cards for 12%, and agriculture-related credit products for 8%.
Lenders are now better equipped to assess borrowers due to repayment records from small-ticket loans for smartphones and electronics. The share of borrowers with above-prime CIBIL scores of 801 or higher increased to 16% in June 2026, compared to 9% in June 2019. The proportion of prime and above-prime originations rose by 17 percentage points.
Growth in Vehicle Lending
Overall vehicle lending has seen substantial growth from June 2019 to June 2026, accompanied by a decline in delinquencies. Two-wheeler loans outstanding surged 3.2 times to Rs 1.76 lakh crore, with the number of borrowers increasing 1.9 times to 3.3 crore. Delinquencies dropped by 128 basis points to 1.4%. Passenger vehicle loans also grew significantly, rising 2.6 times to Rs 11 lakh crore, with borrowers increasing 1.7 times to 2.5 crore.
Average loan sanctions rose by 49% to Rs 8.2 lakh, while delinquencies fell by 95 basis points to 0.5%. The demand for SUVs and rising car prices extended average loan tenures by five months to 62 months.
Market Dynamics
Semi-urban and rural markets accounted for 64% of two-wheeler originations and 61% of all vehicle originations in the first half of 2026, up from 56% in the same period of 2019. Rural car purchases by two-wheeler upgraders grew by 15% annually, compared to 8% for overall auto loans, with these markets representing 51% of higher-value car upgrades.
Non-Banking Financial Companies (NBFCs) held 73% of outstanding two-wheeler loans, an increase of 10 percentage points since 2019. Private banks accounted for 23%, while other lenders held 4%. NBFCs also led passenger vehicle finance with a 37% share, surpassing public sector banks at 30% and private banks at 26%. Used-car originations were 1.5 times pre-pandemic levels.
Broader Borrowing Trends
Two-wheeler loans have facilitated broader borrowing opportunities. Among borrowers from the second half of 2022, 68% took another credit product within three years, rising to 84% for those with at least two years of credit history. Within 12-18 months, 41% opted for consumer durable loans averaging Rs 23,000, while 21% took personal loans averaging Rs 2.47 lakh. Additionally, 18% secured gold loans averaging Rs 1.40 lakh, and 14% obtained credit cards averaging Rs 84,000. Furthermore, 8% financed passenger vehicles with average sanctions of Rs 8.2 lakh, and 5% took home loans averaging Rs 23.7 lakh.
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