Attractive credit schemes fuel sales of auto, electronics
However, brands said they may have to forsake some of their margin if the cost of borrowing goes up for such consumer loans — especially for no-cost EMIs whose interest cost they either bear alone or with retailers — after the Reserve Bank of India increased the risk weight on consumer credit including credit card receivables and bank loans to NBFCs by a fourth.
The central bank's latest move may force banks and non-banks to set aside more capital, which can potentially increase the lending rates.
«Indian consumers are not going to buy consumer goods on EMIs unless those are no-cost,» Haier India president Satish NS said. «So, any increase in borrowing cost will have to be borne by the brands or they may pass it by marginally increasing product prices.»
Cars costing upwards of ₹10 lakh accounted for 41% in total sales in 2022.
The trend has only gained traction in the current year, stoking demand for longer-tenure EMIs and higher loan-to-value (LTV) ratio.
«The LTV used to be around 90% in the pre-Covid period, but post Covid, most customers are preferring it to be anywhere between 90-95%.,» said Nikhil Ranade, head of retail finance at Landmark Group, a luxury and premium automotive retail chain.
