Home Credit India, a local arm of the international consumer finance provider, released its annual survey study ‘How India Borrows (HIB)' on Tuesday. The study captures an overview into India’s borrowing patterns and individual reasons during and post the second wave of Covid-19.
The HIB study was conducted across 9 cities that includes Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Kolkata, Patna, Ranchi. The primary sample size is over 1,200 respondents (Home Credit customers) in the age group of 21-45 years, with an income of less than Rs 30,000 per month.
The research report shows a sharp drop in borrowing for running household expenses to 4 percent in 2021 viz-à-viz 85 percent last year, thereby showing a transition from need-based borrowing to desire-based borrowing. There has been a noticeable uptick in borrowing for business set-up or expansion accounting for (28 percent), followed by small loans or credit for consumer durables purchase at 26 percent of the total borrowings, the survey said.
Other positive reasons were house renovation /new construction (13 percent), medical emergency (2 percent), vehicle loan (9 percent), marriage (3 percent), education loan (2 percent), investments and returning a previous loan et al(1 percent). The survey identified an increase of over 50 percent in borrowings viz-a-viz 2020, however, borrowings for running households declined, it said.
Another positive has bucked the trend for digital empowerment. The HIB report indicates that nearly 40 percent borrowers showed willingness to move to digital platforms for taking loans viz-a-viz over 15 percent customers who have already graduated to the online loan journey instead of traditional offline channels. Although technology has been a key enabler, the survey findings reveal that like all digital trends, chatbot familiarity and trust on it are governed by age – younger customers leading it, the release said.
Speaking on the survey, Vivek Kumar Sinha, Chief Marketing Officer, Home Credit India, said, “The in-house annual study on consumer borrowing trends, How India Borrows 2021, indicates the revival of positive borrowing as people fight to come back from the varied losses incurred in the pandemic year 2020. This resilience of consumers is reflected in the rise in business loans borrowing, home renovation and other positive reasons versus primarily borrowing for meeting household and family needs in 2020."
With many people having suffered job loss, salary reductions, it has led to an increase in consumer need towards business revival this year. Regionally, the survey findings outline that Bengaluru and Hyderabad recovered faster from the pandemic, with 41 percent of respondents in Hyderabad taking loans for business revival and 42 percent respondents in Bengaluru for consumer durables purchases.
While states like Bihar and Jharkhand have the lowest Internet population at 24 percent and 29 percent respectively, digital literacy in terms of using mobile phone in Patna and Ranchi was recorded at 64 percent and 65 percent respectively.
The research also revealed that Kolkata and Delhi have a higher proportion of female borrowers in comparison to cities like Jaipur. Respondents interviewed during the research highlighted that with some handholding and guidance on financial and digital literacy, will ensure their loan journey is completed hassle free and independently.
First Published: IST