Report Overview

The increasing popularity of digital banking and growing consumer preference toward the use of loans for purchasing consumer goods are projected to propel the expansion of the India Consumer Finance Market during the forecast period between 2023 and 2029.

India Consumer Finance Market - Industry Trends & Forecast Report, 2029

India consumer finance market size was estimated at USD 34.42 billion in 2022. During the forecast period between 2023 and 2029, the size of India consumer finance market is projected to grow at a CAGR of 32.34% reaching a value of USD 184.92 billion by 2029. Major growth drivers for the India consumer finance market include an increasing per capita income, high economic growth, rapid urbanization, and higher consumer spending power. One key driver of this growth is the growing preference among consumers for credit card usage. Credit cards offer various benefits such as reward points and promotional offers like movie tickets and flight booking discounts. Notably, the rising popularity of Equated Monthly Installments (EMIs) with 0% or low interest rates is expected to contribute to the growth of the Indian consumer finance market by 2024. Also, the market is likely to benefit from the easy availability of different types of loans, including home loans, car loans, and education loans, offered by both public sector and private banks and financial service providers. The impact of demonetization on the shift towards digital transactions has been positive, although its long-term effect on credit card usage has been moderate. Another driving force is that consumer durable finance is becoming more accessible through collaborations between large electronic retail chains like Croma and Vijay Sales and financial service providers like Bajaj FinServ and Tata Capital, thereby further boosting the market's growth prospects in the forecast period.

India Consumer Finance Market – Overview

The India consumer finance market refers to the sector of the Indian financial industry that specializes in providing various financial products and services to individual consumers. These financial products and services can include credit cards, personal loans, home loans, car loans, consumer durable finance, and other forms of credit and lending solutions. The market caters to the financial needs of individual consumers by offering them access to credit, facilitating purchases of consumer goods, and supporting various personal financial requirements. It is influenced by factors such as economic growth, consumer spending power, urbanization, and changing preferences for financial products and services.

India Consumer Finance Market

Growth Drivers

Growing Preference for Credit Cards

India's financial landscape is witnessing a significant shift, with growing consumer preference towards the use of credit cards becoming a prominent trend. The country, traditionally inclined toward debit cards, has experienced a remarkable surge in credit card adoption over the past decade. Simplified onboarding processes, personalized offers, and innovative mobile apps have contributed to this transformation, attracting both existing and new users. Credit card issuance has grown at an impressive CAGR of 19.8% from FY17 to FY22, even amidst challenging economic conditions. The shift towards credit cards is further evidenced by the increasing monthly PoS transactions and transaction values. These trends underline the changing dynamics of consumer finance and its impact on India's financial landscape. As more individuals embrace the convenience and flexibility of credit card usage, the India consumer finance market is experiencing a significant boost. Credit cards provide consumers with immediate access to credit for various expenses, leading to increased consumption. Furthermore, they offer rewards, cashback, and loyalty programs, making them an attractive choice. This trend not only promotes financial inclusion but also drives competition among financial institutions, resulting in innovative offerings and improved access to credit, ultimately fueling the growth of the consumer finance sector in India.

Restraints

Lack of Financial Literacy among Most of Indian Consumers

India consumer finance market faces a significant hindrance in its growth due to the prevalent lack of financial literacy among the population. This dearth of financial awareness and education limits the understanding of complex financial products, thereby hindering individuals from making informed choices about consumer loans, credit cards, and other financial instruments. As a result, a considerable portion of the population remains excluded from the formal financial sector, relying on informal and often more expensive sources of credit. Bridging this literacy gap is crucial for expanding the consumer finance market, promoting financial inclusion, and ensuring that individuals can access and utilize financial products effectively.

Impact of COVID-19 on India Consumer Finance Market

COVID-19 pandemic adversely affected the India consumer finance market. Lockdowns, economic uncertainty, and disruptions to income streams led to a surge in loan defaults and delayed repayments. Financial institutions faced increased credit risk, necessitating stricter lending criteria. On the bright side, digital adoption accelerated, promoting online loan applications and contactless payments. Additionally, the Reserve Bank of India introduced regulatory measures to provide relief, including moratoriums and restructuring options. As the economy recovers, consumer finance is adapting to the new normal, emphasizing risk management, digital strategies, and financial inclusion to navigate the ongoing challenges.

India Consumer Finance Market

Segmental Coverage

India Consumer Finance Market – By Type

By type, the India consumer finance market is divided into Secured Consumer Finance and Unsecured Consumer Finance segments. The unsecured consumer finance type segment holds a higher share in the India consumer finance market. Unsecured loans, such as personal loans and credit cards, do not require collateral, making them more appealing to a broader range of consumers. This inclusivity is vital in a diverse country like India, where not everyone possesses significant assets for collateral. Furthermore, the convenience of obtaining unsecured credit through digital channels has accelerated its popularity. While interest rates may be higher, the demand for quick, hassle-free credit has driven the unsecured segment's dominance in the market. Also, the unsecured consumer finance segment includes personal loan, home improvement loan, credit card, consumer durable finance, and education loan.

India Consumer Finance Market – By Region

Regionally, the India Consumer Finance Market is segmented as North India, South India, East India, and West India.

Competitive Landscape

Major players operating in the India Consumer Finance Market include Bajaj Capital Limited, Birla Global Finance Limited, Housing Development Finance Corporation, ICICI Group, LIC Finance Limited, L & T Finance Limited, Mahindra & Mahindra Financial Services Limited, Muthoot Finance Ltd, Cholamandalam, and Tata Capital Financial Services Ltd. To further enhance their market share, these companies employ various strategies, including mergers and acquisitions, partnerships, joint ventures, license agreements, and new product launches.

Recent Developments

• In September 2023 - Bajaj Auto Consumer Finance, a subsidiary of Bajaj Auto, received regulatory approval from the Reserve Bank of India (RBI) to operate as a non-deposit taking non-banking financial company (NBFC). This marks the second NBFC within the Bajaj group, alongside Bajaj Finance and Bajaj Housing Finance, both subsidiaries of Bajaj Finserv. Bajaj Auto sought the NBFC license to diversify into financing two-wheeler purchases of non-Bajaj Auto brands, as around 33% of vehicles purchased under the Bajaj Auto brand are currently serviced by Bajaj Finance. The move aligns with the increasing demand for credit, as various entities have pursued NBFC licenses to cater to this growing market.

• In August 2023 - HDFC Bank Ltd announced its strategic move to expand its consumer finance services beyond home loans. The bank, following its merger with HDFC Ltd, is transforming 530 offices that were primarily focused on mortgages into full-fledged banking service centers. The aim is to tap into the growing demand for consumer finance in India, driven by rising retail customer needs. By offering a wide range of loans, including those for appliances, cars, and electronics, HDFC Bank seeks to meet the evolving financial requirements of its customers. The bank also plans to increase its focus on affordable housing and construction finance.

• In June 2023 - Pepper Group, a global consumer finance company, announced a significant investment of USD 150 million over the next four years to establish a fintech company in India. This new venture, operating under the Pepper Money brand, aims to offer a range of personal finance products such as personal loans, credit cards, and BNPL (buy now, pay later) services. Led by Abhishek Kothari, who co-founded FlexiLoans, the company plans to launch in the second half of 2023, targeting 15 crore households in Tier 2 and 3 cities.

Scope of the Report

By Type

• Secured Consumer Finance
• Unsecured Consumer Finance

By Region

• North India
• South India
• East India
• West India