Two of India's younger generations of citizens, Gen Z and millennials, have increasingly opted to fund expensive handsets or high-tech devices and gadgets with personal loans. This incites consumer borrowings, with a sharp increase and Indian banks have increased lending this year driven by a sharp spike in demand for personal loans and other consumer assets. According to a report by the Home Credit, fintech company, How India Borrows, premium consumer electronics personal loans have risen from 1 per cent in 2020 to 37 per cent in 2024. Thus, it will not at all be difficult to explain why young borrowers use the easy credit facilities that enable them to buy products they cannot pay for upfront.
It has reflected a marked change in the nature of consumer borrowing through an annual study that covers 17 Indian cities with an 18-to-55-year-old sample size of 2,500 borrowers. Hence, this set of borrowers is earning an average monthly income of Rs 31,000 and reports themselves increasingly willing to finance aspirational purchases, which include smartphones or any electronic gadgetry, on credit.
Ashish Tiwari, chief marketing officer of Home Credit India, says that the company has been seeing spiking demand, especially in consumer electronics for immediate access to technology and high-end gadgets-even to the extent of taking on a loan for the same.
In addition to consumer electronics, there are other categories and hence, the company is seeing large growth in borrowing. For example, funding for home improvements and buildings increased to 15 per cent last year from 9 per cent in 2022. This is an upward trend that shows people are more interested in renovations of homes since the economy is considered positive and they want to be house owners. "What it says is that people are looking at long-term investments in their assets," says Tiwari.
Meanwhile, education loans did not budge, holding steady at 4 per cent from 2022 through 2024. This must make a family investment in the education of their children all the more likely to be in that top group.
The marriage costs now surpassed the benchmark level at a minimum of 3 per cent in 2021 and jumped to as much as 5 per cent in 2024, while it marked the second consecutive year with a cost increase in the wedding and cultural investments associated with weddings.
Loans related to medical emergencies had plunged sharply, from 7 per cent in 2020 to 3 per cent in 2024. "Thanks to better financial planning and the increasing acceptance of insurance, the requirement for emergency loans is being reduced," said Tiwari.
Another is growing personal travel loans. Growth in two and four-wheeler financing to 6 percent levels in 2024 and this growth trend has hints of consumers being increasingly nervous about mobility and personal transportation, probably a lifestyle change post-pandemic.
Digital Banking Revolution
This report also shows that there is a huge transformation that is taking place in terms of loan management among customers. During 2024, most of the people surveyed, that is 65 per cent, liked app-based banking as the source of borrowing surpassed net banking by 44 per cent. Fast options in a mobile application become ease-friendly so consumers prefer fast and easy usage of financial services.
But in using a mobile banking application, millennials stay at 69 per cent via this channel. In contrast, Gen Z is not far behind with 65 per cent. And finally, after all these years, Gen X has caught up at 58 per cent. Net banking remains steady at 47 per cent for Gen Z as for millennials, but only 35 per cent for Gen X.
Thus, the changing borrowing currents with new generations and a demand for more convenient, instant access and aspirational purchases are associated with the change in digital finance.
