“The Consumer Financing Business in India” – Building Blocks for the Future

In view of this changing landscape, we look at the three major drivers of growth in consumer finance: auto finance, housing finance and consumer durable finance. We discuss the trends in each of these areas as well as the shortcomings which are slowing down growth. We present some of the innovative product ideas which have appeared in the market recently and others which have the potential and can pick up provided adequate attention is paid. These include customer financing by large retail outlets, range of credit card offerings, innovations in education finance, rural finance, etc. The role of risk management has also been discussed as far as containing delinquencies and losses in repayment of loans are concerned. The mortgage portfolio performance will get affected by a sharp drop in real estate prices, drop in rents, changes in the tax laws removing exemptions for mortgage repayments. The Auto loans portfolio can get affected by the drop in re-sale values of cars, decrease in car prices, exchange rates, etc. Unsecured products like personal loans and credit cards can get affected by macro economic factors like employment rates, inflation, interest rates etc. We therefore provide an overview of the risk mitigation strategies which are available to lenders and progress made in this direction so far.