EMI (equated monthly installment) cards are the most preferred medium for taking short-term credit, with 49 per cent of borrowers choosing the mode in 2023 owing to higher trust and faster disbursals, as per a survey by Home Credit India, the local arm of Dutch consumer finance provider Home Credit.

Further, embedded finance has gained traction, with 50 per cent of borrowers open to opting for the same during e-shopping. However, the share of the segment has fallen 10 per cent y-o-y due to stringent RBI regulations on BNPL (Buy Now, Pay Later) and PPI (prepaid payment instruments) products, leading to fewer offers.

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Borrowing trends

Trends in borrowing have shifted from ‘running the household’ in 2021 to ‘consumer durables’ in 2023, with 44 per cent of borrowers purchasing smartphones and home appliances in 2023. However, on a whole, the share of consumer durable loans declined by 9 per cent, whereas business-related borrowing increased by 5 per cent.

The ‘How India Borrows Survey 2023’ was conducted across 17 cities with data from 1,842 borrowers in the age group of 18–55 years with an average monthly income of ₹31,000.

One-fourth of borrowers opted for the online channel for availing loans, even as loans initiated through telecalling increased from 16 per cent in 2022 to 19 per cent in 2023, and those through POS or bank branches declined from 56 per cent to 51 per cent.

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“Over half the borrowers (51 per cent) are looking forward to completing their entire future loan application on the mobile app without any physical interaction with POS or banks. The preference for online loan mediums is primarily driven by younger and aspirational small-town borrowers,” the report said, highlighting cities such as Dehradun, Ludhiana, Ahmedabad, and Chandigarh.

Concerning trend

The report also highlighted a concerning trend: that only 18 per cent of borrowers understood data privacy rules, and 88 per cent had only a superficial understanding. Further, only 23 per cent understand the usage of their personal data by loan apps.

While 60 per cent of borrowers were worried about how their personal data is collected and used, and 58 per cent believed the apps collect more data than required, nearly 60 per cent — especially borrowers from Tier-I towns — said they don’t have control over the data being shared by them.