Consumer Finance in India

08

Fall

08

Fall

CONSUMER FINANCE

1.Introduction

A consumer may obtain loan for the purchase of a vehicle, refrigerator, washing machines, etc., when a bank or any other financial agency provides loan to a consumer for the purchase of consumer durables it is called as consumer credit.

The consumer with his income is not in a position to repay the full value of consumer durables but would like to take advantage of his future earning and purchase them through installment payment to his creditor. By doing so, he not only enjoys the product, but he is also in a position to repay the value of the product. Hence, through consumer credit banks provide loans to enable the consumer to purchase valuable goods.

Today the size of the consumer finance market is estimated at over Rs 70,000 crore, clocking an annual growth of over 30 percent. Seven out of ten cars are currently sold through loans. Rural markets also account for one-third of the consumer finance purchase. Cheaper and more easily available finance has enabled consumers to upgrade and buy costlier products. As a result, purchase patterns have changed significantly, and consumers are now buying higher quality goods.

Popularity of Consumer Finance

Consumer credit is gaining popularity these days due to dual forces operating on it. One is keenness of the consumers and second is still higher eagerness of the financiers. One of the reasons has been growing strength of the upwardly mobile Indian middle class. The rapid increase in the disposable income of the class has increased their capacity to afford to buy consumer durables to improve their standard of living.

The boom in the consumer durables and automobile industry is also responsible to make consumer finance popular. It has also made middle income group more status conscious and they look for financing facilities to...