The economic growth of India had started moving at a slower pace even before the outbreak of the COVID-19 pandemic leading to a rise in salary cuts and job losses. Owing to this situation, people are more concerned about meeting their daily expenses. This has led to a rise in demand for consumer lending products. Indeed, reports show that there has been a spike in the outstanding balance on credit cards and personal loans.
A report from the India Retail Credit Trends by TransUnion CIBIL highlights that the consumer credit grew in Q3 of CY 2019 with a spike in demand for categories such as personal loans and credit cards. The new account volumes of personal loans have also recorded a tremendous growth of 133.9% in Q3 2019 as consumer demand for the credit product continued to accelerate.
The new accounts increased by 48 per cent between the third quarter of the calendar year 2019 and 2018. The consumption lending categories of credit cards and personal loans recorded growth rates of 40.7% and 28.0%, respectively in the third quarter of 2019.
Amid this economic slowdown, the personal loan balances managed to grow in Q3 2019 compared to the previous year by 28.0%. Not only that but also balances in semi-urban/rural locations and metro/urban locations has been increased by 31.5% and 25.8% respectively. Another interesting fact is that, of all the personal loan acquisitions, 42.6% were from individuals under the belonging to the age group of 18-30 years.
The spike in personal loans and credit cards may be due to salary delays due to the economic slowdown which forces people to borrow from their credit cards or loan lenders to make ends meet. The origin volumes of the loan accounts have doubled have more than doubled over the third quarter of 2018. This has increased by 2.9 times in Q3 2019 over Q3 2018.
Consumer inquiry volumes for personal loans and credit cards increased significantly over the period, though the enquiries for the other loans remained unchanged or the same.
The minimum personal loan rate in India stands at 10.50%. Most of the banks offer personal loans to their customers with minimum paperwork and documentation processes. To apply for a personal loan, all you need is a basic identity proof and the income certificate along with a photograph, bank account details, and residence proof.