New NPA wave? The curious case of millennial loan culture
All eyes on millennials
Millennials represent nearly 34% of the Indian population and are the biggest spending generation.
There have been concerns raised about the financial behaviour of millennials, especially if there are over-leveraging in the process & those raising such flags are pointing to the dipping national savings rate.
Confessions of a shopaholic
In what displays increasing consumption-oriented tendencies, unsecured loans consisting of credit cards, personal loans and consumer durable loans contribute 72% of the millennials' credit requirements. The aspirational class now wants to explore, go on exotic holidays, buy luxury items, etc., and they don’t shy away from taking loans for such personal needs.
Compared to this, secured loans of two-wheeler and car loans consisted of only 9% of the millennials' credit appetite.
The number of self-monitoring millennials grew by 58% between 2016 and 2018, becoming one of the most credit-conscious consumer segments, while credit-conscious non–millennial consumers grew by just 14%.
Millennials in Gujarat have the highest average score of 747, followed by Haryana at 743 and Rajasthan at 742, according to the report.
Many new-age products having alternate underwriting models have been introduced to cater to this population.
A large proportion millennials opt for short term personal loans offered by digital lenders and fintechs using alternate data like utility bills, mobile usage etc. This helps them not only meet their impending financial needs, but also begin building their credit profile.