Consumer durable loans plunge, card usage rises

Consumers have stopped taking bank finance for buying durables, preferring instead to pay outright, latest Reserve Bank of India data seem to suggest.

Consumer durable loans given by banks declined 9% year on year in January, marking a return to the trend set over the second half of last calendar — growth was negative August through November — before festive buying lifted disbursals a whopping 27.8% in December.

“In the consumer durable industry, purchase by bank financing forms only 10-12% of the total sales. During the last three years, this has not grown at all,” said Ruchika Batra, general manager, Samsung India.

Bankers, however, see this as a seasonal shift rather than a serious slowdown in consumer buying.

“It is common for banks to see a slight slowing in such loans when the festival season has passed. During October-December, these loans will see a push, which has to taper in the following months. There is nothing negative about it,” said NS Srinath, executive director, Bank of Baroda.

In fact, according to some bankers, the lenders themselves aren’t too comfortable with such loans.

“These are unsecured loans and have a very small ticket size. So, it is quite possible that many banks are not comfortable with this,” said RK Bansal, executive director, IDBI Bank.

Interestingly, the credit card segment logged a noteworthy 8.5% growth in January, compared with a negative growth of 11.6% during the same period last year, the central bank’s monthly loan data show. In December, the segment had grown 6.2% year on year.

The retail loan segment too showed a rise of 12.7% in January — almost the same level as December (12.3%) but down a tad from the 16% seen in January the previous year.