Believe it, post COVID-19, the Credit Cards EMI is now lifeline for Indians – due to stress in income across households, widespread salary cuts and poor sentiments triggered by fear of losing jobs are the reason for the shift in consumer behavior towards purchase on EMI. Banks in India are offering Loans to consumers at very low interest rate under the various schemes like GECL, COVID-19 loans etc. Tightened in liquidity have made consumers avoid outright cash purchases, hence the buyers are preferring to purchase even low value goods like milk, vegetables, and other food items on equated monthly installment (EMI). They are paying the utility bills in installments.
The shift is more towards Credit Cards EMI rather than visiting the bank for loans. The another reason for going higher with Credit Cards is simple in converting the purchases in to EMI. Moreover, Non-banking financial companies (NBFCs) have tightened their loan schemes fearing delinquency. Finance on cards has surged by 30-40% in past few month from pre-Covid days.
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The total business on credit is at the pre-Covid levels of 70%. However, the contribution of paper finance (offered by NBFCs & banks) dropped to a third of what it used to be. The slack has been picked up by credit card finance.
The EMIs on Credit cards now account for over 80% of total card swipes from 60% earlier. Online eCommerce Marketplace Amazon has launched the Amazon Pay Later facility and said there is six times growth in customer adoption since launch. Almost all the big retailers who were earlier not offering the EMI like Arvind Brands, which manages multiple apparel brands such as Tommy Hilfiger and Arrow, Puma and Woodland, are offering EMI on cards.
The future of Business through Credit Cards are higher and Public Sector banks need to analyze their portfolio as the contribution is almost minimum except SBI Cards.