Consumer loans hit a record in Q1 amid steep rise in electronic goods prices

Kolkata: Consumer financing scaled a new high in the June quarter, boosting its contribution to total retail sales, as consumers increasingly availed of loans to absorb steep price hikes and navigate economic uncertainty, showed data from the Reserve Bank of India (RBI), market researchers and companies.

The surge was fuelled by greater financing of consumer electronics such as smartphones, televisions, laptops, and air-conditioners, where companies raised prices 12-40% over the past six months. This was done to offset sharp increases in memory chip prices besides higher commodity costs, triggered by the West Asia crisis.

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Overall, consumer durable loan outstanding from banks and non-bank financial companies (NBFCs) grew 9.2% this fiscal year till May to a record ₹1.19 lakh crore from ₹1.09 lakh crore till March, per data collated by credit information company Equifax India shared with ET.

Latest RBI data showed banks' consumer loan outstanding grew 4.3% at the end of May over March to ₹22,906 crore, rebounding from a 5.3% decline in FY26. Banks' credit card outstanding increased 1.3% on-year to ₹2.95 lakh crore at the end of May though it was largely unchanged from March. June data is yet to be published. The central bank on Tuesday said consumer durable loans by upper and mid-tier NBFCs including housing finance companies surged 42% year-on-year to ₹68,814 crore in FY27 at the end of May. This data captures 87% of the NBFC universe.

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"The average financing tenure has increased by almost three months this year," said Nilesh Gupta, director at electronics retail chain Vijay Sales. "While consumer finance has now expanded into smaller towns, a key challenge is that some consumers are unable to secure approvals as NBFCs have tightened their lending norms."

The trend was mirrored by lenders. Bajaj Finance, India's largest NBFC, disbursed 16.4 million loans in the June quarter, surpassing the festive December quarter's 13.9 million. Number of new loans rose 22% year-on-year.

Industry executives said the expansion of NBFCs into smaller towns is also fuelling growth in consumer financing, a segment previously dominated by banks.

Financing accounted for 40% of smartphone sales in the June quarter, up from 35% a year earlier, even as the overall smartphone market contracted nearly 11%, according to smartphone market researcher Counterpoint Research.

"With the smartphone market under pressure, which is expected to intensify further, financing is emerging as the primary purchase mechanism," said Tarun Pathak, research director at Counterpoint Research. "Around 67% of financed smartphone sales are now backed by NBFCs." All India Mobile Retailers Association chairman Kailash Lakhyani said financing in general trade has picked up, growing by 20-23% year-on-year in the June quarter due to a shift in transaction type from cash to credit.

Electronics brands have lengthened financing tenures to keep monthly instalments affordable. Smartphone financing has been extended to 15 months from 12, while financing for TVs, laptops, ACs and refrigerators currently stretch to 24 months from 18 months.