KOLKATA: Zero-cost financing schemes and cash-backs have taken the fizz out of vanilla consumer durable loans banks offer. The volume of the banking sector’s consumer durable loan pie has shrunk 75% yearly while non-banks continue to thrive with attractive packaging of loan products. According to the Reserve Bank of India data, banks’ outstanding consumer loans now stood at Rs 4600 crore at the end of January, against Rs 19700 crore a year back. 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 the 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. LeadinVijay Sales Director Nilesh Gupta, a leading retailer with 82 stores in Vijay, consumers have shifted to no-cost or zero-cost finance from NBFCs or through credit cards. At the same time, hardly any consumer comes with a bank cheque nowadays.
Banks’ credit card outstanding grew 29% year-on-year to Rs 84200 crore in the same period from Rs 68600 crore. For instance, ICICI BankNSE -0.01 % offers an easy EMI scheme for purchasing white goods using credit cards. “The easy and instant availability of no-cost finance schemes right at the store has become a much more lucrative one than getting bank finance,” said Gupta. At Vijay Sales, over 55% of total purchases are on finance as compared to 35% three years back.
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. “There has been an increase of almost 30% in the value of consumer finance. For appliances, almost 45% of purchases are driven by finance,e while it is around 52% for television,” said Sharma. These loans normally last a year and would have been repaid before the festival season – Janmashthami, 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 in favor of getting a loan from NBFCs.
