Gone are the days when Consumer Loans offered by banks were attractive. Not many prefer to go for Consumer Durable Loans from banks. Various reasons are analysed here.
- Zero cost financing schemes and Cash back offers have taken over the place of consumer loans.
- The volume of banks’ Consumer Loan portfolio has come down by 75% year-on-year and non-banking institutions try to survive with attractive schemes and pricing.
- A Reserve Bank of India data reveals that banks’ outstanding consumer loan portfolio was Rs. 4,600 crores as on January end this year, against Rs. 19,700 crores last year.
- This is said to be the case, in-spite of private sector lender HDFC paying more attention on this.
- Also, this shows a dull demand for consumer loans after September.
- Preferences were observed to borrow from NBFCs who provide such loans.
- Also, demand for such consumer durables against credit also came down due to a low demand after the harvest season which normally is high.
- Also, it is noticed that consumer have shifted to no cost or Zero cost finance from NBFCs or to credit cards and one can observe that there is no one who comes with a bank cheque these days.
- Also, the Banks’ credit cards outstanding grew 29% year on year to Rs. 84,200 crores at the same period from Rs. 68,600 crores last year.
- To quote an example, ICICI Bank offers easy EMI schemes for purchasing white goods through credit cards which means easy availability of more attractive no-cost finance schemes at the door steps.
- Sales outlets have increased their sales by over 20 to 25% year-on-year which has brought a blow on the Bank Loans portfolio. These loans are offered by the Sales companies for a period of 3 years to sync with the festival seasons.
This clearly indicates the preference of Consumers to make a shift in availing Consumer Loans from NBFCs rather than Banks.