Unsecured loans are on the rise as Indian aspirations meet easy borrowing. Do lenders and households need to be cautious?
EMI of Rs 2,700—which he thought wouldn’t pinch his wallet—for 24 months.
Meanwhile, Delhi-based Rishi Shah was looking to go on a holiday somewhere in India. Eventually, the 42-year-old marketing professional and his family flew to Bali—on a nocost EMI, which meant he didn’t have to pay any interest on the quick loan he got through the travel company.
Over the past year, while a section of the vast Indian middle class has reined in spending on non-essentials amid high inflation, many have been buying consumer products— on credit.
This has, in part, fuelled India’s consumption, which is showing some resilience amid slowing growth in the rest of the world post-pandemic.
One of the key drivers of consumption are unsecured loans that do not require any type of collateral.
Even the banking regulator has warned lenders to keep a close watch on unsecured loans, which include loans for consumer goods, personal loans and credit cards. While the official data, as of now, does not set the alarm bells ringing, certain lending parameters do warrant caution.
Indians are travelling more than ever.
Millennials, young working professionals and the emerging middle class are looking to travel despite financial constraints. Many are opting for flexible payment options like Travel Now Pay Later (TNPL), which have grown by more than 25% since the pandemic, says Abraham Alapatt, president and group head — marketing, Thomas Cook (India) and SOTC Travel.
For consumer durables, too, people are willing to upgrade and do not mind availing of EMIs if prices are not affordable, says Nilesh Gupta, director of Vijay Sales, an electronics and consumer retail chain.
According to a study “How India Borrows”, published by consumer finance provider Home
