K. ARAVIND
The change in the pattern and nature of loans is an important factor accelerating consumption in our country. As peoples’ spending increased, banks and financial institutions changed the rules and regulations of making credit available to them, which accelerated people’s spending and increased the volume of consumption.
Consumption increased as the EMI culture strengthened. In the past, loans were used only for housing and car purchases, but now it has changed to a culture of EMI-based payment for whatever you buy. Credit card companies are promoting this method. Most banks offer the facility of repaying whatever you buy with a credit card as an EMI. This facility is available in addition to the interest free loan period of up to 55 days.
Credit card companies also offer interest free refunds as EMIs. Such schemes operate with a processing fee of three to five per cent.
Non-banking financial institutions are attracting customers of consumer electronics products through interest free loans. Only processing fees are charged for such loans. All you have to do is repay the loan amount as EMI. The loan is based on a special agreement with the consumer electronics manufacturer. Such loans, which are available only on pay slip and ID card copies and signed check leaves, have led to an increase in sales of consumer electronics products.
In the past, fears of default in loans had prompted institutions in the sector to impose restrictions on lending, but today new lending methods are opening up in the wake of major changes in the lending sector. With the advent of credit bureaus, nobody wanted a black mark on their credit history and so came the end of disappearing consumers. In order to get large loans like home loans and car loans, the credit history has to be secure and it has become the need of the consumer not to default on small loans. While loans are a part of life, the consumer is most careful not to fall behind in creditworthiness. This change has made it possible for non-banking financial institutions to lend ‘generously’ to buy consumer electronics products and without the fear of NPAs.
With the spread of EMI culture, consumers feel that they should not procrastinate. Before buying a mobile phone, TV, refrigerator or washing machine, there is no need to look for cash. The only criterion for deciding whether to purchase an item is whether the EMI can be refunded each month.
