Gen Z, Mid And Smaller Cities Drive India’s Borrowing Trends: HIB Survey 2023

The annual How India Borrows Survey 2023, by Home Credit India, has been released showing India’s constantly evolving consumer borrowing behaviour. The survey revealed that India’s changing borrowing pattern is being driven by Gen Z and by borrowers from mid-sized or smaller cities. In the last couple of years the need to buy consumer durables like smartphones and home appliances is driving the borrowing (44 per cent in 2023) trend. Earlier it used to be for running the household. But the overall pattern to borrow for consumer durable has dipped by 9 per cent while business-related borrowing has gone up by 5 per cent. It is now 19 per cent of the total middle-class borrowing which is used to expand or to start a new business. The survey also showed expanding footprints of Digital India as most borrowers, 48 per cent, relied on online shopping for their purchases. Of these, 44 per cent of borrowers opted for online banking as their preferred financial transaction mode. Mobile banking for day-to-day financial updates was preferred by over half (54%) of the respondents.

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The HIB 2023 survey also revealed that over one-fourth of borrowers avail of loans via online channels. Initiation of loans via telecalling was up by 3 per cent (from 16 per cent in 2022 to 19 per cent in 2023), while there was a decline of 5 per cent in loans through POS/ bank branches. The shift to digital banking looks like a one-way traffic now as over half of the borrowers (51 per cent) anticipate completing their entire loan application process via a mobile app in the future. They declined to deal with POS systems or banks in person. Younger, ambitious small-town borrowers are driving the surge in online lending channels; this group includes 61 per cent of borrowers in Dehradun, 59 per cent in Ludhiana, 56 per cent in Ahmedabad, and 52 per cent in Chandigarh.

In recent years, embedded finance has become more popular, and 50 per cent of borrowers are willing to use it when they shop online. Due to faster disbursement and trust factor, EMI cards (49 per cent) are still the most popular method of obtaining credit. Speaking on the consumer study, Ashish Tiwari, Chief Marketing Officer, of Home Credit India, said “At Home Credit India, we are dedicated to fostering financial literacy and empowering individuals to make informed choices. The survey not only highlights the preferences of today's borrowers but also emphasizes the need for greater awareness of data privacy. As we navigate this digital era, Home Credit remains committed to providing trustworthy, transparent and accessible financial solutions, ensuring a responsible and inclusive financial future for all."

The HIB Study was conducted across 17 cities including Delhi-NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad, Lucknow, Jaipur, Bhopal, Patna, Ranchi, Chandigarh, Ludhiana, Kochi, and Dehradun. The sample size is approx. 1842 borrowers in the age group of 18-55 years, with an average income of Rs. 31,000 per month.  The survey highlighted India’s swift digital transition is not free from worries as there is a serious concern among borrowers about how loan companies are using their personal information. Only 18 per cent of borrowers were aware of the data privacy regulations; most of them (88 per cent) only had a basic understanding of the topic.

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Roughly 60 per cent of borrowers are concerned about the way lending apps obtain and use their personal information. Additionally, according to 58 per cent of these anxious borrowers, the lending apps gather more data than is necessary. Borrowers from smaller towns and members of Gen Z expressed greater concern about the volume of data that lending apps collect. 78 per cent of borrowers from Chennai expressed concern about the volume of data being gathered.

Of the middle-class borrowers, 23 per cent are digitally literate and have previously heard or seen about the chatbot service. 43 per cent of borrowers—led by women and Gen Z—find chatbot services to be user-friendly. With 59 per cent of borrowers having received loan messages on WhatsApp, the messaging app is becoming a popular digital channel for loans. Still, only 25 per cent of borrowers believe that loan offers they receive through WhatsApp are reliable; Gen Z borrowers are more likely to believe this.

39 per cent of borrowers stated they would like an established organization to teach them about finance-related tasks online, with Gen Z expressing the greatest interest in this growing field of financial education. Greater interest in financial education was evident in smaller towns like Bhopal (48 per cent), Patna (55 per cent) and Ludhiana (57 per cent).