A significant percentage of millennial-led borrowers prefer the online mode to obtain loans over traditional offline channels, indicating an increase in digital penetration during the COVID-19 period, according to a survey.
After the second wave of the COVID-19 pandemic, shows a largely positive trend in consumer borrowing and, therefore, reflects a return to normal as consumer sentiments are positive and dynamic about the economic recovery, according to one annual “How India Borrows” (HIB) survey conducted by financial firm Home Credit India.
Almost 40% of borrowers have expressed their willingness to switch to digital platforms to take out loans. That’s over the 15 percent of customers who have already moved 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, the familiarity and trust of chatbots is governed by the younger customers who run them.
The HIB study was conducted in 9 cities including Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Kolkata, Patna and Ranchi. The main sample size was over 1,200 respondents (Home Credit clients) in the 21-45 age group, with an income of less than Rs 30,000 per month.
There was a sharp drop in borrowing for current household expenditure to 4 percent in 2021 i.e. 85 percent last year, showing a shift from needs-based borrowing to needs-based borrowing. desire because of the recovery in the economy, the investigation report said.
There was a notable increase in borrowing for business creation or expansion accounting for 28%, followed by small loans or credits for the purchase of durable consumer goods to 26% of total borrowing. he declares.
Other positive reasons were home renovation / new construction (13%), medical emergencies (2%), car loan (9%), marriage (3%), education loan (2 %), investments and return from a previous loan, etc. (1 percent).
The survey identified a more than 50 percent increase in borrowing in 2020, however, borrowing to manage households declined, he said.
The pandemic has also led to the acceleration of digitization, as a growing number of borrowers show a preference for adopting an online lending pathway for future borrowing, thus boosting digital empowerment in financial services. , although the penetration of financial literacy is still ongoing, Home Credit India, Marketing Director Vivek Kumar Sinha said.
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 cell phone use in Patna and Ranchi has been recorded at 64% and 65%. respectively, he said.