Money & Banking

46% people borrowed money to run their households during Covid times, reveals Home Credit India research

Our Bureau New Delhi | Updated on November 04, 2020

Impact of pay cuts among reasons for people to resort to borrowing

With job losses and pay cuts across industries during the Covid-19 pandemic, the lower middle-income group has been affected severely, says the findings of research from Home Credit India, a local arm of the international consumer finance provider with operations spanning over Europe and Asia.

Home Credit India conducted a research across 7 cities to understand the borrowing patterns of people during the Covid lockdown. The pandemic has led to a shift in perspective towards loans and borrowing preferences, the research said.

Pay cuts\ delays

The research revealed that 46 per cent respondents borrowed money primarily to run their households. The impact of the pay cuts/delays was the next big reason why most borrowers resorted to borrowing, 27 per cent of respondents cited repayment of their monthly instalments from the earlier loan as the second biggest reason behind borrowing. As many as 14 per cent of the respondents borrowed as they suffered job losses.

Marko Carevic, Chief Marketing and Customer Experience Officer, said in a statement: “We undertake a research every year to understand our customers and their preferences better. The impact of the pandemic is still unfolding, and people have gone through an extremely difficult time. Our research on the borrowing patterns of India has revealed some interesting new trends which contrast with the trends of the pre-Covid times. The lockdown time has seen borrowing happening from family and friends due to the flexibility in returning the amount as the pandemic has set a lot of uncertainty in the lives of people. Incomes are scrunched making people borrow money to run their households.”

Borrowing from friends and family was seen highest in Mumbai and Bhopal at 27 per cent each followed by Delhi at 26 per cent and Patna at 25 per cent. The research also revealed that the decision to borrow money from family and friends was led by the male members of the households at 23 per cent. The women interviewed in the research revealed a preference towards either not borrowing or borrowing from financial institutions as against family and friends.

Family needs

A similar study was conducted by Home Credit India in August 2019. The study then revealed that among the primary reasons for borrowing money, fulfilling family’s needs topped with 46 per cent of the respondents followed by the desire to upgrade their lifestyle which was at 33 per cent. Lifestyle upgrades were quoted as an updated smartphone/TV/refrigerator or vehicle.

Another insight of the research reveals, unlike normal times, during Covid, people preferred to borrow money from their friends and families as it gave them the flexibility to return the money when the situation normalised/jobs and salaries were restored.

The research also showed that 50 per cent of the respondents admitted to returning the borrowed sum once the situation normalised/they returned to their jobs. 13 per cent of the people said they will look at returning the sum after paying their loan amounts.

Published on November 04, 2020

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