New Delhi- A significant percentage of borrowers led by millennials, prefer online mode to secure loans rather than traditional offline channels, indicating an increase in digital penetration during the COVID-19 period, says a survey.

Post the second wave of COVID-19 pandemic, shows a largely positive consumer borrowing trend and thereby, reflects a return to normalcy as consumer sentiments are positive and buoyant about economic revival, according to an annual survey ‘How India Borrows’ (HIB) conducted by financial firm Home Credit India.

Nearly 40 percent borrowers showed willingness to move to digital platforms for taking loans. This is over and above the 15 percent customers who have already graduated to the online loan journey instead of traditional offline channels.

Although technology has been a key enabler, the survey findings reveal that like all digital trends, chatbot familiarity and trust on it are governed by age younger customers leading it.

The HIB study was conducted across 9 cities that includes Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Kolkata, Patna, Ranchi. The primary sample size was over 1,200 respondents (Home Credit customers) in the age group of 21-45 years, with an income of less than Rs 30,000 per month.

There has been a sharp drop in borrowing for running household expenses to 4 per cent in 2021 viz–viz 85 per cent last year, thereby showing a transition from need-based borrowing to desire-based borrowing due to revival of the economy, the survey report said.

There has been noticeable uptick in borrowing for business set-up or expansion accounting for 28 per cent, followed by small loans or credit for consumer durables purchase at 26 per cent of the total borrowings, it said.

Other positive reasons were house renovation/new construction (13 per cent), medical emergency (2 per cent), vehicle loan (9 per cent), marriage (3 per cent), education loan (2 per cent), investments and returning a previous loan etc (1 per cent).

The survey identified an increase of over 50 per cent in borrowings viz-a-viz 2020, however, borrowings for running household declined, it said.

The pandemic has also led to the acceleration of digitalisation as rising number of borrowers are showing preference for adopting online loan journey for future borrowings, hence strengthening digital empowerment in financial services, although financial literacy penetration is still a work in progress, Home Credit India, Chief Marketing Officer, Vivek Kumar Sinha said.

With many people having suffered job loss, salary reductions, it has led to an increase in consumer need towards business revival this year.

Regionally, the survey findings outline that Bengaluru and Hyderabad recovered faster from the pandemic, with 41 per cent of respondents in Hyderabad taking loans for business revival and 42 per cent respondents in Bengaluru for consumer durables purchases.

While states like Bihar and Jharkhand have the lowest Internet population at 24 per cent and 29 per cent respectively, digital literacy in terms of using mobile phones in Patna and Ranchi was recorded at 64 per cent and 65 per cent respectively, it said.

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