Lenders Use Easy Credit to Increase Consumer Spending Amid Diwali


Some of India’s leading lenders and shadow finance companies are helping fuel demand from consumers keen to splurge on everything from clothing to two-wheelers and homes, offering hope for a consumer-driven recovery in Asia’s third-largest economy.

Businesses expect sales during Diwali to pick up to levels seen before the pandemic early last year. This is in part because financiers, sitting on a huge pile of excess cash, are eager to lend with outstanding sustainable consumer loans, already at their highest level in more than three years. Borrowers want to take advantage of record interest rates, an improving labor market as lockdowns ease, and a better economic outlook as vaccinations accelerate.

HDFC Bank retail loans jumped 12.9% in the quarter ended September from a year earlier, the lender’s first double-digit growth for these loans since the onslaught of the pandemic. The country’s third-largest private lender, Axis Bank’s personal loans grew 16%, the fastest pace in five quarters, and the assets of India’s largest consumer lender Bajaj Finance increased by a record.

“We expect economic activity to pick up further, driven by the holiday season, the resumption of vaccination and the likely increase in government spending,” said Srinivasan Vaidyanathan, HDFC chief financial officer. Bank on a recent earnings conference call. Government spending on better health services, roads and infrastructure is crucial as it stimulates growth and incomes, economists say.

Vaidyanathan added that loans to the retail sector were increasing. For the country’s largest private lender, this is a change in strategy after the withdrawal of personal loans last year.

Overall, personal loans offered by banks rose 12.1% in September from 8.4% a year earlier, led by durable consumer goods, housing, auto loans and loans against loans. gold jewelry, according to the Reserve Bank of India.

And it’s not just the banks, but also some shadow lenders – an industry hampered by a damaging default in 2018 – who are keen to get started by offering loans for as little as 10,000 rupees ($ 134).

Mehul Kumar, a 24-year-old Youtuber based in Mumbai, recently decided to buy a sports bike with a loan of 1.3 million rupees. “Interest rates are low, banks are ready to lend during Diwali, and the winter season is great for biking. I got my loan approved in just 24 hours, ”he said over the phone.

Times of the “feasts”

Indian lenders have used the pandemic to consolidate their capital base, which now allows them to increase lending, especially to the household sector. Private sector banks, which have been at the forefront of scaling up consumer lending, raised Rs 536 billion in equity in the past fiscal year while their state counterparts raised Rs 120 billion. capital rupees.

“Growth is better right now in a wider set of segments, recoveries are under control,” said Dipak Gupta, deputy managing director of Kotak Mahindra Bank Ltd. “It all gives a comforting feeling to take your foot off the brake and start moving it towards the accelerator.

Read about the banks and builders who are basing their hopes on a festive revival

According to Rajeev Jain, managing director of Bajaj Finance Ltd, there has been a strong pick-up in growth in recent months, compared to when the second wave was at its peak – a period he called “famine”.

“We live in times of famine and feast,” Jain added. In the absence of a new wave, “we are quite confident about growth in the second half of the year.”


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