Borrowing for consumer durables on the rise; EMI cards remain popular medium of credit: Survey

While consumer durable loans decreased by 9%, business-related borrowing increased by 5%, making it a total of 19% middle-class borrowing to expand or to start a new business, revealed Home Credit India’s How India Borrows Survey 2023.

Most of the borrowers in the study are online pros, with 48% relying on online shopping for their personal purchases.

As many as 44% of these borrowers rely on online banking for financial transactions.

More than half (54%) are comfortable with mobile banking for day-to-day financial updates.

Another major highlight is the growing acceptance of digitalisation of financial services.

As per the HIB 2023, over one-fourth of borrowers opted for online channels for availing loans. Loans initiated through telecalling increased by 3% (from 16% in 2022 to 19% in 2023), while loans through POS/ bank branches saw a decline by 4% (from 56% to 51%).

In line with the digital transition, more than half of the borrowers (51%) are looking forward to completing their entire future loan application on a mobile App without any physical interaction with POS/ Banks.

The preference for online loan mediums is primarily driven by younger and aspirational small-town borrowers, with cities like, Dehradun at 61%, Ludhiana at 59%, Ahmedabad at 56%, and Chandigarh at 52%.

Embedded finance has gained traction in recent years with 50% borrowers open to embracing the same during e-shopping.

However, the uptake for the product among borrowers has come down by 10% from 2022 due to stringent RBI regulations on BNPL & PPI products leading to fewer offers.

It is preferred as it makes borrowing faster and makes ecommerce shopping an easier process.

EMI cards continue to be the most preferred medium for taking credit due to higher trust and faster disbursals.

The HIB Study was conducted across 17 cities including Delhi-NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad, Lucknow, Jaipur, Bhopal, Patna, Ranchi, Chandigarh, Ludhiana, Kochi, and Dehradun.

The sample size is approx. 1842 borrowers in the age group of 18-55 years, with an average income of Rs. 31,000 per month.

As India accelerates into the digital lending era, the study underlines a critical concern among borrowers regarding the usage of their personal data by loan companies.

Only 18% borrowers understand the data privacy rules, majority of them (88%) with just the superficial understanding on the subject.

About 60% of borrowers are worried about how their personal data is collected and used by the lending apps. 58% of these worried borrowers also feel that lending apps collect more data than required.

In Kolkata, borrowers are relatively older, with an average age of 35.4 years.

Interestingly, Kolkata boasts a substantial online shopping demographic, with 65% of residents engaging in online purchases.

However, when it comes to financial literacy, only 28% of borrowers expressed interest in learning about finance-related matters from reputed organisations.

When it comes to understanding data privacy guidelines, 19% of borrowers claimed to understand how loan companies use their personal data, while a substantial 59% believe that lending apps collect more data than necessary.

Nationally, less than one-fourth (23%) of the borrowers understand about the usage of their personal data by loan apps.

Borrowers from Chennai seem to be more digitally advanced and 76% of them claim to understand the usage of personal data. Almost 60% of the borrowers in India voice out that they don’t have any control on the data being shared by them, more so by borrowers from tier 1 towns.

A total of 70% of the borrowers feel the need of transparent communication on the usage of personal data.

This is mostly driven by males and Gen Z.

Borrowers across geographies except the South seem to have a similar opinion.

In terms of digital literacy, 23% of middle-class borrowers have heard/seen about the chatbot service in the past. 43% borrowers find chatbot service as easy to use, led by Women, & Gen Z.

WhatsApp is an emerging digital channel for loans with 59% of borrowers having received loan messages on WhatsApp.

However, only one-fourth borrowers consider loan offers received on WhatsApp as trustworthy, with Gen Z showing more trust towards this.

As interest in financial education is growing in the country, 39% of borrowers said they would like a reputed organization to educate them about finance-related tasks over the Internet with GenZ showing maximum interest.

Smaller towns like Ludhiana (57%), Patna (55%) and Bhopal (48%) show a higher interest in financial learning.