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Unlocking Consumer Finance: Trends in Credit Card Dues, Gold Loans, and More

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The surge in credit-driven purchases, along with the rise in gold, vehicle, and home loans, reflects a dynamic consumer finance landscape in 2023, despite economic uncertainties.

The financial landscape in 2023 was characterized by a surge in credit-driven purchases and the expansion of loan segments such as credit card dues, gold loans, vehicle loans, and home loans. These trends show evolving consumer preferences and the growing reliance on financing options for various expenditures. As consumers continue to navigate economic uncertainties, the availability of diverse financial instruments plays a crucial role in shaping spending behaviors and investment decisions.

Credit Card Dues Surge

Credit-driven purchases gained momentum in 2023, marked by a substantial increase in credit card dues, reaching a six-year high, as per the latest data from the Reserve Bank of India (RBI). The total outstanding balance on credit cards surged by 32.6% year-on-year in 2023, outpacing the growth rate of 28.2% recorded in 2022. This surge was attributed to attractive offers such as cashbacks and no-cost EMIs, enticing consumers to use credit cards for various purchases, including smartphones, televisions, home appliances, and fashion products.

Gold Loans Increase

In line with the rise in credit card dues, gold loans also witnessed significant growth in 2023. The data revealed an 18.6% increase in gold loans last year, compared to a growth rate of 12.4% in 2022. Gold loans are often considered a viable option for consumers seeking financing due to their lower interest rates compared to unsecured loans. This uptick in gold loans indicates a trend of leveraging assets for higher consumption among consumers.

Expansion of Vehicle and Home Loans

Moreover, vehicle and home loans experienced notable expansion in 2023, with growth rates in the double digits year-on-year. Vehicle loans grew by 20.5% in 2023, marking a significant acceleration from the 7-9% growth seen in the pre-Covid-19 period. Similarly, home loans also registered robust growth, contributing to the overall increase in retail credit. These trends reflect the willingness of consumers to invest in big-ticket items such as vehicles and homes, supported by favorable financing options available in the market.

Impact on Consumer Spending

The surge in credit-driven purchases and the expansion of various loan segments have had a profound impact on consumer spending patterns. Discretionary spending on entry to mid-segment products has been subdued, attributed to factors such as high inflation, debt accumulation among rural and lower-income consumers during the peak of the pandemic, and delayed demand recovery in rural areas. However, the share of credit-based purchases has witnessed a steady increase across categories like electronics and automobiles, indicating a shift towards financing options for big-ticket purchases.