Lending to Consumers
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Category : Sectoral Trackers
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The spending pattern of today's generation is driven more by 'want' than 'need'. Hence consumer lending has been growing in India on the back of consumption demand by the millenial working population which happens to have a higher disposable income. This age group has a higher per capita income and willingness to spend a significant portion of it. With the growth of credit card distribution and quick traditional consumer loan disbursements, the trend is likely to continue in the foreseeable future. Innovations such as 'Zero Interest Loans' has proven to be a major success and can further boost the demand for consumption in the durable goods space.
Non-Banking Financial Companies (NBFCs) largely depend on credit history of borrowers. But since the CIBIL score as a concept is new in India and less than 1/4th of the population has a score, most individuals have paid little to no attention to its importance. For many, the dilemma is that you cannot get a credit without a score, and you cannot build you score without credit.
So far the focus is on such traditional data sources but if they want to increase their earnings potential they will have to rely on alternative sources and lend to the financially creditworthy population which are currently excluded. CIBIL is an important element to the financial inclusion of the masses and along with alternative credit scoring platforms for critical credit information it will determine the scale of growth of the consumer lending sector.
With the per capita income steadily rising, the consumption story of India is just beginning.