Demand for personal loans and credit cards increased in economic slowdown

As per a report, The economic slowdown has increased the demand of the credit balance in the country. Due to the slow economy, the salaries are getting delay for which people are moving towards loan products.

According to the India Retail Credit Trends report by TransUnion Cibil, consumer credit grew (at lower rates) in Q3 of CY 2019 due to an increase in demand for categories such as personal loans and credit cards. Although, the overall increase in the loan products is only 13% compared to 23.2% the last year. Demand for auto loans, home loans and loans against property fell between July and September 2019, while demand for consumption lending products increased.

“Growth in credit cards outstanding is significant at this point of time as it does mean that credit is being used for meeting daily requirements. With growth in consumption being more or less stagnant, higher use of credit cards does indicate that households in the lower income levels are meeting daily requirements by borrowing,” said Madan Sabnavis, chief economist, CARE Ratings

“As we have seen, there has been a retail boom which is being supported by retail credit of which demand for credit cards is most rampant. The transactions are of a lower denomination at this level but do aggregate to a high amount. There has been some aggression shown by banks in selling credit cards with several offers thrown in,” said Sabnavis. “When incomes are stagnant and there aren’t adequate jobs in the economy, there’s a tendency to depend on credit which becomes a habit. Banks must monitor this to ensure delinquency doesn’t increase.”