29 March 2020
As the indebtedness of the average Indian grows, we cannot ignore the surge of retail loans over the past five financial years. As we cast our eyes on the rise in the number of loan accounts, we observed that retail loans have clocked a compounded annual growth rate (CAGR) of 16.4%. However, the CAGR of the number of loan accounts is just 7.5%. This is an indication of the increase in loan value per account has increased.
In this post, we explore the reasons for the rise in borrowings and an easy way to get an instant personal loan for all your needs.
The average increase in Indian borrowing exceeds the growth in what the income would warrant. This can be inferred from the comparison of per capita loan amount versus per capita GDP growth. As per FY 2018, the growth rate of per capita GDP was 8.5%, while the per capita loan amount increased 17.9%. There’s enough evidence that the average Indian is not loathed to borrow and spend.
The unbridled growth in loans for banks as well as for non-banks such as instant cash loan apps signals the growing consumerism. Public and private banks are also happier lending to retail borrowers. Saddled by the dud corporate loans, banks are now extending flexible loan repayment options. Historically, the ratio of bad loans has not been more than 2% while those for farm loans and industrial loans have been far higher. Moreover, credit scores and instant cash loan apps have made it easier for individuals to avail loans from the comfort of their homes.
The sharpest growth in indebtedness has been observed in unsecured personal loans. Young Indian borrowers are opting for EMIs (equated monthly instalments) to fulfil a variety of their desires ranging from international travel to luxury goods. Indians are also increasingly spending on discretionary expenses such as vehicle upgrades, electrical appliances, house furnishings, etc.
There have been no major delinquencies despite an increase in the interest rates. This was because when the high-interest rates from the banks pinched the borrowers of unsecured loans, they moved to cheaper, short-term loans from non-banking institutions. The increase in interest rates has pushed retail borrowers towards instant cash loans which offer quick loans at lower interest rates. This has also been facilitated by the institutions tapping into different types of credit. Growth of online lenders, eKYC norms, expansion of digitally enabled lending technologies have been the major catalysts for the rise in demand for personal loans. For example, EarlySalary’s instant cash loan app provides instant cash loans for every purpose, no questions asked.
With the growing demand for consumer credit, the financial institutions are gearing up to provide a more efficient means of lending. There are now more opportunities for lenders to tap the demand for consumer loans and credit cards. Fintech-powered loans are also on the rise as they can leverage technology and facilitate application and approval processes more speedily as compared to the traditional lenders who still use time-consuming, antiquated processes.
As the fintech sectors opens new doors for innovative solutions, personal lending is set to turn online personal loan apps into the single most popular destination for customers looking to secure quick personal loans or payday loans. Fueled largely by millennials and their unlimited aspirations, easy personal loans are all set to grow. With a personal loan app like EarlySalary, borrowers can apply for loan within minutes and receive an approval within 8 to 24 hours. These personal cash loans allow the borrower to gain immediate and unfettered access to borrowed funds secured through bank transfers. Many justifiably believe that personal loans are the type of loans to serve customers’ needs for immediacy and availability and now with personal loans online, new segments can be served better.