Consumer durable loans, which saw healthy growth in the July-September quarter, are likely to see a good growth rate in the coming quarters as well, say lenders.
“We estimate that the demand for consumer loans will be high in the coming times, owing to continued sale activity by various online & brick/mortar businesses,” says Anil Pinapala, chief executive officer and founder, Vivifi India Finance.
Typically, consumer durable loans are short-term unsecured loans that are availed to purchase everyday items like washing machines, air conditioners, televisions, microwaves, furniture and others.
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Both banks and non-bank lenders witnessed sizeable growth in consumer durable loan disbursals. The growth in these loans was among the highest across categories.
The disbursement of consumer loans by non-banking financial companies (NBFCs) rose 37% year-on-year (YoY) in July-September, the latest data from the Finance Industry Development Council showed.
Similarly, bank loans for purchasing consumer durables jumped 51.2% YoY in November, the latest Reserve Bank of India (RBI) data on the sectoral deployment of credit showed.
Despite Covid-19-related disruptions, consumer durable loans grew at a compound annual growth rate (CAGR) of around 11% in the last three financial years, in which over 70% of loans were disbursed to the age group below 40 years, say industry players.
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“During the first wave, NBFCs and fintechs were able to make quick changes in their existing processes and policies, and provide end-to-end digital experience to customers, thereby increasing efficiency and ensuring disbursement without face-to-face interaction,” Narendra Dixit, head of retail banking, CSB Bank, said.
“Given the demand and the experience, this will continue to build traction on the back of strong data governance,” he added.
The ticket size for consumer durable loans are typically lower than other types of personal loans like home loans and vehicle loans. Various lenders also offer a no-cost equated monthly installment option for borrowers for purchasing consumer durables.
“A major factor behind the surge in consumer durable loans can be the psychological reasons associated with revenge shopping. The strict restrictions of the pandemic mostly resulted in muted festivities; there has been a significant change in the behaviour of the consumers, who are now more eager to shop when normalcy is almost restored,” Mahesh Shukla, CEO & founder, PayMe, said.
According to Shukla, the retail segment accounts for 48.9% of the total lending sector in India and the figures are projected to be more promising going forward. There can be some ups and downs on the way, but the growth rate is not going to stop anytime soon.