With the strict measures to control COVID-19 having had a significant impact on household incomes the government stepped in to provide a moratorium on loan repayments for up to six months. This was well received for consumer lending products with lower interest rates, with it proving breathing space to those with financial difficulties.
Due to COVID-19 consumers have had to cancel or postpone large events such as weddings as well as expensive trips abroad. As such, this has reduced the demand for other personal loans, which benefit strongly from these important life events.
Q4 is the most important shopping season in India due to key festivals such as Diwali and Dussehra and it is hoped that this will encourage consumers to increase their spending after what has been a difficult year. This period is also often when consumers are most likely to invest in big ticket items.
Providing COVID-19 is contained then consumer credit is projected to rebound strongly in 2021, both in terms of gross lending and outstanding balance. During 2020 consumers exercised caution, postponing the purchase of big ticket items due to wage and job insecurity.
Despite a largely positive outlook for consumer credit, it is expected that lenders and borrowers will continue to exercise caution heading into the forecast period. The measures to control COVID-19 have taken a heavy toll on the Indian economy, with rising unemployment and wage cuts, and this is likely to deter many consumers from taking on additional debt unless necessary.
Card lending is expected to be the most dynamic area of consumer credit over the forecast period. Card lending is projected to account for 71% of gross lending in current value terms by 2025, up from 52% in 2020.
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This report originates from Passport, our Consumer Credit research and analysis database.
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