Loan distributor Andromeda Loans reported a 63 per cent increase to Rs 60,000 crore in loan disbursements in FY22-23 compared to the previous year.
In FY2018-19 and FY2018-19, loan disbursements were Rs 15,333 crore and Rs 36,842 crore, respectively.
Andromeda says the increased demand suggests people’s strong desire to upgrade their lifestyles. During FY 22-23, business loan disbursements grew the most at 101 per cent, followed by personal loans at 59 per cent.
Raoul Kapoor, co-chief executive officer of Andromeda Sales and Distribution Pvt. Ltd., says personal loans rose driven by consumption-led demand. “After Covid-19, the Indian consumer psyche changed. It is now a ‘right here, right now’ mentality. Ten years ago, the average age of people purchasing a home was above 40, and now it is around 25.”
Kapoor believes people have a knee-jerk reaction when interest rates rise, but higher rates have become the norm over time. In most cases, people postpone their needs by three to four months and then adjust to the new normal afterwards. “When repo rates were raised, loan disbursements did not slow down; only their growth rate moderated,” says Kapoor.
How Indians Borrowed Last Year
An Andromeda research indicates that the average individual loan amount of a person living in the metros has increased from Rs 8 lakh to Rs 12 lakh.
In mid-metropolis, like Ahmedabad or Indore, both the loan amount (ticket size) and the number of people taking loans have increased. On the other hand, ticket sizes remained the same in Tier 3 and Tier 4 cities, although the number of loan applicants increased. Kapoor observes that lower-income groups take more time to digest the rate hike.
To explain the dip in demand for affordable housing, he referred to the lower-income groups’ delay in decision-making over the rate hike. He also said supply-
side constraints and the cost of building materials have contributed to the dip in affordable housing. Notably, the total home loan disbursals through Andromeda grew from Rs 17,505 crore to Rs 26,328 crore.
About why the personal loan space is showing remarkable growth, he noted that when home loan rates increased by 250 basis points (bps), personal loan rates rose by only 25 to 50 bps. He says there is fierce competition in the personal loan market, and lenders are hesitant to translate repo hikes into higher personal loan rates.
Loans against property disbursals were Rs 20,649 crore, up 78.7 per cent from Rs 11,556 crore in fiscal 2021-22. These loans are taken mainly by self-employed people, which explains this growth. “During Covid-19, it was the self-employed who lost jobs, and banks were reluctant to sell to them. As Covid subsided and the economy bounced back, the MSME (micro, small, and medium enterprises) sector started borrowing for business,” says Kapoor.
Kapoor has a tip for borrowers: “Borrow as much as you need. Don’t let greed overpower you. Build up a good credit history with your lender. Maintain a good CIBIL score, and you will get better rates from banks.”
