The volume of the banking sector’s consumer durable loan pie has shrunk 75% yearly.
KOLKATA: Zero-cost financing schemes and cash backs have taken the fizz out of vanilla consumer durable loans offered by banks. The volume of the banking sector’s consumer durable loan pie has shrunk 75% year on year, while non-banks continue to thrive with attractive loan product packaging.
According to the Reserve Bank of India data, banks’ outstanding consumer loans stood at Rs 4600 crore at the end of January, compared to Rs 19700 crore a year ago. This was despite private sector lender HDFC Bank’s recent thrust on this segment.
This also reflects a muted consumer demand post-September.
“There was a shift to borrowing from NBFCs, which provide such loans. Demand for such goods against credit also came down as the post-harvest / festival season demand did not work out,” CARE Ratings chief economist Madan Sabnavis said.
Vijay is a leading electronics retailer with 82 stores. Sales director Nilesh Gupta said consumers have shifted to no-cost or zero-cost finance from NBFCs or through credit cards, while hardly any consumer comes with a bank cheque nowadays.
Japan’s leading consumer electronics maker, Panasonic India’s chief executive officer, Manish Sharma, said people are upgrading their purchases with the help of easy financing options, raising the consumer bill value.
“The value of consumer finance has increased by almost 30%. For appliances, almost 45% of purchases are driven by finance, while for television, it is around 52%,” said Sharma.
These loans normally last for a year and would have been repaid before the festival season—Janmashtami, Ganesh Chaturthi, Nag Panchmi—beginning in August.
CARE Ratings’ Sabnavis said the fall in banks’ consumer durable loans came down sharply in August, showing the shift in consumers’ preference for getting loans from NBFCs.
