Unlike the slowdown a decade ago, demand for credit cards and
personal loans will remain as consumers look to secure funds to bridge gaps in
personal finance.
Demand for secured
loans — home and auto loans — is expected to see a pronounced dip in the coming
quarters as consumers look to stay liquid during the Covid-19 crisis. Products
that provide liquidity like credit cards and personal loans will see moderate
demand, according to credit information bureau CIBIL.
Unlike the
slowdown a decade ago, demand for credit
cards and personal loans will remain as consumers look to secure funds to
bridge gaps in personal finance. Their availability and market penetration are
higher than earlier.
The prevalence of
fintech firms has also introduced new, flexible product structures and enhanced
access via digital channels. Equally, because of the nature of the Covid-19
crisis, there has been an increase in the need for digital payments, which
credit cards facilitate.
CIBIL said
consumers are reducing discretionary spending, and they will cut down on
travel. The demand for secured lending products like auto and home loans will
likely remain weak for some time, it added. The lockdowns have had far-reaching
implications. Consumers’ finances have changed dramatically, with many seeing
pay cuts and lay-offs. There has been a sharp drop in consumer sentiment and
consumption demand and spending have taken significant hits.
Abhay Kelkar,
vice-president (research and consulting) TransUnion CIBIL, said the social,
financial and economic impact of Covid-19 will be far reaching and will lead to
a realignment of the retail credit market.
India’s retail
credit market is still growing at a much higher rate than most others around
the world. However, this is a global crisis and no economy is immune, Kelkar
said.
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