Home Credit India, a local arm of the international consumer credit provider, on Tuesday released its annual survey “How India Borrows (HIB)”. The study provides insight into India’s borrowing patterns and individual reasons during and after the second wave of Covid-19.
The HIB study was conducted in 9 cities including Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Kolkata, Patna and Ranchi. The main sample size is over 1,200 respondents (Home Credit clients) in the 21-45 age bracket, with an income of less than Rs 30,000 per month.
The research report shows a sharp drop in borrowing for household current expenditure to 4% in 2021, or 85% last year, showing a transition from borrowing based on need to borrowing based on desire. There was a notable increase in borrowing for business creation or expansion (28%), followed by small loans or credits for the purchase of durable consumer goods to 26% of total borrowing, according to the investigation.
Other positive reasons were home renovation / new construction (13%), medical emergency (2%), car loan (9%), marriage (3%), education loan ( 2%), investments and repayment of a previous loan et al (1%). The survey identified a more than 50 percent increase in borrowing in 2020, however, borrowing for executive households declined, he said.
Another positive element has thwarted the trend towards digital empowerment. The HIB report shows that nearly 40% of borrowers have expressed a willingness to switch to digital platforms for taking out loans, i.e. over 15% of clients who have already switched to the online lending journey instead of traditional offline channels. . While technology has been a key enabler, survey results reveal that like all digital trends, familiarity and trust in chatbots is governed by age – with younger customers in the lead, according to the release.
Speaking on the investigation, Vivek Kumar Sinha, Director of Marketing, Home Credit India, said: Varied losses suffered during the pandemic year 2020. This resilience of consumers is reflected in the increase in lending to businesses, home renovation and other positive reasons for borrowing primarily to meet the needs of households and families in 2020. “
With many people experiencing job losses, pay cuts, this has resulted in an increased need for consumers to relaunch businesses this year. At the regional level, survey results indicate that Bengaluru and Hyderabad have recovered more quickly from the pandemic, with 41% of respondents in Hyderabad having taken out loans for business revival and 42% of respondents in Bengaluru for purchases of durable consumer goods.
While states like Bihar and Jharkhand have the lowest internet population at 24% and 29% respectively, digital literacy in terms of mobile phone use in Patna and Ranchi has been recorded at 64% and 65% respectively.
Research also found that Kolkata and Delhi have a higher proportion of female borrowers compared to cities like Jaipur. Respondents interviewed during the research pointed out that with some grip and guidance on financial and digital literacy, their lending journey will be hassle-free and independently.
First publication: STI