The aggressive push by non-banking financial companies (NBFCs) into consumer durable financing has steadily eroded the market share of private sector banks.
Apart from established players like Bajaj Finance and HDB Financial Services, newer entrants such as Poonawalla Fincorp and TVS Credit have intensified competition, leveraging strong merchant tie-ups and technology-driven platforms to capture point-of-sale lending for electronics and household appliances. Aggressive sales and marketing strategies have allowed them to dominate the space.
What does data from credit bureau CRIF High Mark show?
Data from credit bureau CRIF High Mark show that NBFCs accounted for nearly 82.8% of the value of consumer durable loan originations for the December quarter, up from about 70% two years ago. In contrast, private banks’ share has declined from 29% to 14% during the same period. The trend is similar even in terms of volumes.
“Regulations have also contributed to NBFCs gaining traction, as they can directly market zero-interest-rate schemes for their products, while banks are restricted from highlighting those in their promotional strategy,” said a senior official from a private sector bank.
Bank credit to consumer durables
Data for bank credit to consumer durables further highlighted the trend. According to the Reserve Bank of India (RBI), bank credit stood at Rs 22,360 crore in the December quarter, down about 4% year-on-year.
Private banks, however, have not entirely exited the space, says another official from the private bank. Instead, they have recalibrated strategies by shifting the focus from consumer durable loans to credit card-based financing.
By offering discounts on card swipes, banks are able to generate multiple streams of revenue – swiping fees, point-of-sale machine charges, EMI conversion fees, and, in cases of default, hefty interest charges. This shift allows banks to remain competitive while reducing direct exposure to unsecured consumer durable loans.
The overall consumer durable loan portfolio stood at about Rs 96,300 crore as of the December quarter, growing around 14% year-on-year. However, loan volumes remained largely flat.
Pankaj Naik, director, India Ratings and Research, said: “Lenders are becoming cautious about unsecured exposures, with NBFCs expected to remain conservative on such portfolios through FY27.”