{"id":44,"date":"2024-01-17T05:43:29","date_gmt":"2024-01-17T05:43:29","guid":{"rendered":"https:\/\/indigenesis.com\/insights\/?p=44"},"modified":"2024-01-18T12:30:06","modified_gmt":"2024-01-18T12:30:06","slug":"from-savings-to-spending-the-evolution-of-borrowing-in-india","status":"publish","type":"post","link":"https:\/\/indigenesis.com\/insights\/from-savings-to-spending-the-evolution-of-borrowing-in-india\/","title":{"rendered":"From Savings to Spending: The Evolution of Borrowing in India"},"content":{"rendered":"\r\n

The Changing Financial Landscape<\/strong><\/p>\r\n\r\n\r\n\r\n

The evolution of borrowing trends in India is intricately tied to the changing financial landscape, notably marked by a significant surge in the digital lending ecosystem. In recent years, the credit market has experienced remarkable growth, with predictions indicating that the digital lending market is poised to expand from $270 billion in 2022 to an astounding $1.3 trillion by 2030. This surge has been propelled by the emergence of digital lending companies, contributing to a robust compound annual growth rate (CAGR) of 39.5 percent over a decade.<\/p>\r\n\r\n\r\n\r\n

Rise of Consumer Lending Startups<\/strong><\/p>\r\n\r\n\r\n\r\n

India is home to approximately 1,263 digital lending startups, out of which over 147 (12% of the total 1,263) are backed by venture capital funding. With venture capital inflow in B2B lending startups having grown at a CAGR of 72% (2015-2019) it remains the most favored sub-segment within the lending tech segment.<\/p>\r\n\r\n\r\n\r\n\r\n\r\n

Credit Cards: India’s New Favorites<\/strong><\/p>\r\n\r\n\r\n\r\n

In recent times, the Indian market has witnessed an exponential surge in demand for short-term loans related to purchases and spending. This can be ascertained from the data shared by the Reserve Bank of India (RBI)<\/a> which shows that credit card use in India has ticked up significantly over the past year. In April 2023, India had over 8.6 crore (86 million) credit cards, up 15% from 7.5 crore (75 million) in April 2022. This number could hit the 10-crore (100 million) milestone by early 2024.<\/p>\r\n\r\n\r\n\r\n\r\n\r\n

What is driving the growth?<\/strong><\/p>\r\n\r\n\r\n\r\n

The digital lending sector in India is booming, thanks to two main factors: more and more people gaining access to the internet (almost half of India’s population), and a strong digital framework called India Stack. This framework includes essentials like electronic Know Your Customer (e-KYC), Unified Payments Interface (UPI), and account aggregator systems. Together, they are bringing about a significant change in the entire digital lending landscape.<\/strong><\/p>\r\n\r\n\r\n\r\n

Decreased Emphasis on Household Savings<\/strong><\/p>\r\n\r\n\r\n\r\n

Household savings in India have hit a five-decade low, dwindling to 5.1% of the GDP in FY 2023 from 7.2% in FY 2022. This is concerning as a higher savings rate has typically been associated with robust economic growth. Concurrently, data from the RBI reveals a substantial increase in financial liabilities of households, jumping from 3.8% of GDP in FY 2022 to 5.8% in FY 2023.<\/p>\r\n\r\n\r\n\r\n

Conclusion<\/strong><\/p>\r\n\r\n\r\n\r\n