Changing facets of Indian Borrowers

Prof. Abir Ghosh, Assistant Professor, IQ City United World School of Business, Kolkata Indian borrowers have travelled a long distance in the last few decades. We have been, historically, borrowing for daughter’s marriage, real estate and sometimes to buy gold. Borrowing for lifestyle enhancement was never on our radar. We would have frowned upon over such a thought & never contemplated twice to reject such an idea vehemently. But now, gradually, we are seeing a transition towards newer dimensions; primarily driven by the bug of ‘consumerism’. No harm, per se! With a growing economy (some prefer calling it by a more sophisticated name – “Emerging Market Economy”, famously abbreviated as EME), the expense curve is bound to put up a steep trend. It is, indeed, true that our household-to-debt ratio stands at a meagre at 11% as compared to a staggering (60 – 120) % in many developed as well as emerging economies. But we are slowly inching ahead to leave our mark in the space of retail, consumer-driven loans. Credit card numbers have shown a remarkable improvement from an insignificant penetration of 1 out of 31 in 2017 to 5 out of 100 in 2020. And it is believed that the only direction it can move is  — northward. According to the recent Digital Payment tracker report published by Motilal Oswal Financial Services Ltd., it is registered that we have achieved significant growth in the value space of credit card spending The spending on credit cards showed a phenomenal uptick of 43% annually. This comes with a backing of a monumental credit card base of roughly 68 million, an astonishing yearly growth of 12.5%. This kind of growth has not come at the expense of any other payment mechanism as during the same period cash transactions on UPI platform have registered a breath-taking growth of 97%. Instigated by the bug of consumer confidence, the spiralling growth in the lending space is bringing up creative disruption in the retail loan market by the introduction of a new form of loans, like Buy Now Pay Later (users love to call it ‘BNPL’). This is becoming the latest fad among the millennials because of the in-built convenience factor attached with this type of interest-free, small-ticket loan.