A survey conducted by Home Credit India revealed that the main use of loans was for buying consumer durables followed by borrowing for business expansion and home renovation.
A survey conducted by Home Credit India indicates that a significant portion of loans is being utilized for buying consumer durables, with funding for business initiatives and home renovations closely trailing. The borrowing for smartphones and home appliances has surged to 37% in 2024, a remarkable increase from a mere 1% in 2020, as highlighted in the study titled “How India Borrows 2024” by Home Credit India.
Indian consumers are eager to upgrade their lifestyles, whether by purchasing the latest smartphone or a new washing machine. The study reveals that the predominant use of loans is for consumer durables, followed by financing for business ventures and home improvements.
Notably, borrowing for business expansion and start-ups has escalated from 5% in 2020 to 21% in 2024, reflecting a robust entrepreneurial spirit as individuals pursue new income opportunities. This trend is spurred by economic changes due to the pandemic and substantial government support for micro, small, and medium enterprises (MSMEs) through various credit schemes and subsidies.
Additionally, loans for home improvements have risen from 9% in 2022 to 15% in 2024, indicating a trend where individuals are investing in their living spaces to live in their ideal homes.
In a noteworthy shift, borrowing for medical emergencies has decreased to 3% from 7% in 2020, suggesting that enhanced financial planning and improved access to healthcare may be yielding positive results.
The study also revealed that education loans have remained stable at 4% from 2022 to 2024, emphasizing the ongoing significance of investing in children’s education. Furthermore, borrowing for weddings has gradually increased from 3% in 2021 to 5% in 2024, underscoring the enduring cultural importance of fulfilling social obligations.
The “How India Borrows 2024” 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, with a sample size of approximately 2,500 borrowers aged between 18 and 55 years, with an average income of Rs 31,000 per month.
Spike in Digital Financial Transactions
The research revealed that as consumers become more tech-savvy, their borrowing behaviors are increasingly leaning towards app-based banking, with 65% preferring this method over browser-based banking, which stands at 44% in 2024. This shift underscores a growing consumer inclination towards convenience and round-the-clock financial access, moving away from traditional branch visits, alongside an increase in digital literacy.
App-based banking is particularly favored by Millennials at 69%, followed by Gen Z at 65% and Gen X at 58%. Regionally, metropolitan areas lead with a 71% adoption rate, while Tier 2 cities follow closely at 69%. In contrast, browser-based banking is more prevalent among Gen Z and Millennials, each at 47%, with Gen X exhibiting the lowest engagement at 35%.
The trend of online shopping has also shown signs of normalization after the significant disruptions caused by the COVID-19 pandemic. In 2021, online shopping usage peaked at 69% due to health and safety concerns but fell to 48% in 2023 as restrictions were lifted. By 2024, there has been a modest recovery to 53%. Women (60%), Millennials (59%), Gen Z (58%), and residents of metropolitan and Tier 2 cities (56% each) are now the primary drivers of this trend. The leading cities for online shopping include Kolkata (71%), Kochi (66%), Hyderabad (64%), Chennai (60%), and Ranchi (59%).
Rise in Usage of Chatbots and WhatsApp
According to the study, chatbots are becoming increasingly popular in customer service, with 27% of middle-class borrowers reporting familiarity with this tool, marking a 4% increase from the previous year. Awareness is particularly pronounced among Gen Z, with 30% indicating familiarity. Furthermore, 38% of borrowers find chatbots user-friendly for customer service inquiries, and 29% express trust in the responses they receive from these tools.
The convenience offered by innovative financial solutions, such as embedded finance and EMI cards, is driving their adoption. Nearly 50% of borrowers who support embedded finance believe it accelerates the borrowing process and simplifies e-commerce transactions. For instance, 64% prefer major e-commerce platforms (such as Amazon, Flipkart, Meesho, etc.), while 21% choose travel applications (like MakeMyTrip, ClearTrip, etc.), and 23% utilize food delivery services (such as Zomato, Swiggy, etc.).
The research indicates that interest in embedded finance is significantly greater among Generation Z (55%) and male individuals (45%), revealing a demographic disparity in engagement levels. Furthermore, consumers residing in Tier 1 cities, especially in urban areas such as Lucknow (68%), Patna (53%), Ahmedabad (52%), Bhopal (52%), and Ranchi (52%), demonstrated a stronger inclination towards embedded finance.
EMI Cards have emerged as the most favored credit instrument among lower-middle-class borrowers in India, with 43% identifying them as their preferred choice due to enhanced trust and quicker disbursement times. Other notable avenues for securing loans include credit cards, favored by 24% of borrowers, and digital lending applications, preferred by 12%.
Regional differences in borrowing preferences are pronounced. In Tier 1 and Tier 2 cities like Kochi (85%), Lucknow (73%), and Ranchi (69%), borrowers show a preference for physical branches, suggesting that personal interaction and trust are highly valued. Conversely, borrowers in metropolitan areas such as Bengaluru (64%), Hyderabad (53%), and Chennai (48%) are increasingly inclined towards online channels, driven by accessibility and familiarity with technology, which reflects their willingness to embrace digital financial services.
