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* The HIB survey shows a sharp decline in household borrowing to 4% in 2021 viz- à -viz 85% in 2020, indicating a transition from need-based borrowing to desire-based borrowing

* Sharp uptick in borrowing needs for business requirements or set-up, house renovation, consumer durables purchase in the post pandemic era

* Nearly 40% borrowers led by millennials, willing to jump the online loan journey mode versus traditional offline channels for future borrowings

* Borrowing is high in cities such as Bangalore (67%) and Hyderabad (49%) followed by Delhi (42%) and Jaipur (39%)

New Delhi : Home Credit India, a local arm of the international consumer finance provider with operations spanning over Europe and Asia and committed to driving financial inclusion in India, released its annual survey study ‘How India Borrows’ (HIB) today. The 2021 HIB study concludes Year 2021, post the second wave of Covid-19 pandemic, shows a largely positive consumer borrowing trend and thereby, reflects a return to normalcy as consumer sentiments are positive & buoyant about economic revival. The study captures an overview into India’s borrowing patterns and individual reasons during & post the second wave of Covid-19.

The HIB study was conducted across 9 cities that includes Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Kolkata, Patna, Ranchi. The primary sample size is over 1200 respondents (Home Credit customers) in the age group of 21-45 years, with an income of less than Rs.30,000 per month.

The research report shows a sharp drop in borrowing for running household expenses to 4% in 2021 viz-à-viz 85% last year, thereby showing a transition from need-based borrowing to desire-based borrowing. There has been a noticeable uptick in borrowing for business set-up or expansion accounting for (28%), followed by small loans or credit for consumer durables purchase at 26% of the total borrowings. Other positive reasons were house renovation /new construction (13%), medical emergency (2%), vehicle loan (9%), marriage (3%), education loan (2%), investments and returning a previous loan et al(1%). The survey identified an increase of over 50% in borrowings viz-a-viz 2020, however, borrowings for running households declined.

Another positive has bucked the trend for digital empowerment. The HIB report indicates that nearly 40% borrowers showed willingness to move to digital platforms for taking loans viz-a-viz over 15% customers who have already graduated to the online loan journey instead of traditional offline channels. Although technology has been a key enabler, the survey findings reveal that like all digital trends, chatbot familiarity and trust on it are governed by age – younger customers leading it.

Speaking on the survey, Mr. Vivek Kumar Sinha, Chief Marketing Officer, Home Credit India, said, “The in-house annual study on Consumer borrowing trends, How India Borrows 2021, indicates the revival of positive borrowing as people fight to come back from the varied losses incurred in the pandemic year 2020. This resilience of consumers is reflected in the rise in business loans borrowing, home renovation and other positive reasons versus primarily borrowing for meeting household & family needs in 2020. The pandemic has also led to the acceleration of digitalisation as rising number of borrowers are showing preference for adopting online loan journey for future borrowings, hence strengthening digital empowerment in financial services, although financial literacy penetration is still a work in progress.”

Further adding he said, “Home Credit believes in empowering people’s lives through financial inclusion and credit penetration for all its markets, especially in India and the HIB study is an approach to understand the evolving borrowing behaviour and then provide right support to consumers, by bringing forth the key factors for credit enhancement, access to financial lending to raise incomes, increase resilience, and improve lives.”

With many people having suffered job loss, salary reductions, it has led to an increase in consumer need towards business revival this year. Regionally, the survey findings outline that Bengaluru and Hyderabad recovered faster from the pandemic, with 41% of respondents in Hyderabad taking loans for business revival and 42% respondents in Bengaluru for consumer durables purchases.

While states like Bihar and Jharkhand have the lowest Internet population at 24% and 29% respectively, digital literacy in terms of using mobile phone in Patna and Ranchi was recorded at 64% and 65% respectively. The research also revealed that Kolkata and Delhi have a higher proportion of female borrowers in comparison to cities like Jaipur. Respondents interviewed during the research highlighted that with some handholding and guidance on financial and digital literacy, will ensure their loan journey is completed hassle free and independently.

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