Consumers borrowing more to set up businesses: Survey

NT Correspondent

Bengaluru: With the opening up of the economy following the retreat of Covid-19 pandemic, the borrowing patterns of young Indians have undergone a change from a need-based borrowing to a desire based one; according to a survey by consumer finance provider Home Credit India.

In its annual survey ‘How India Borrows’, Home Credit provides an overview into India’s borrowing patterns and individual reasons during the second wave of Covid-19 and later. The study was conducted across nine cities - Delhi, Jaipur, Bengaluru, Hyderabad, Bhopal, Mumbai, Kolkata, Patna and Ranchi. The primary sample size is over 1,200 respondents (Home Credit customers) in the age group of 21-45 years, with an income of less than Rs 30,000 per month.

The findings show that there has been a sharp drop in borrowing for day-to-day household expenses to 4 per cent of the total borrowings in 2021, as against 85 per cent last year.

On the other hand, there has been a rise in borrowing for setting up or expansion of businesses, accounting for 28 per cent of total borrowings, followed by small loans or credit for consumer durables purchase (26%). Other positive reasons were house renovation /new construction (13%), vehicle loan (9%), marriage (3%) and education loan (2%).

The trend for digital empowerment is also on the rise, mainly powered by young customers. The survey indicates that nearly 40% borrowers showed willingness to move to digital platforms for taking loans. Although technology has been a key enabler, the survey shows that like all digital trends, chatbot familiarity and trust on it are governed by age – younger customers leading it.

As per the survey, borrowing is high in cities such as Bengaluru (67%) and Hyderabad (49%) followed by Delhi (42%) and Jaipur (39%), while Kolkata and Delhi have a higher proportion of female borrowers when compared with cities like Jaipur.