No one ready to finance consumers

MUMBAI: Sales through consumer finance packages have almost halved to 8% in the last few months from 15% in the corresponding period last year. Observers say that players like Citigroup and ICICI Bank are no longer pushing consumer finance schemes for customers.

Most of these companies are focusing on pushing sales through their credit cards. NBFCs like Bajaj Finance and Future Money also paint a pessimistic scenario in the wake of rising interest rates, which is seen as affecting demand.
���The tracking mechanism through credit cards is more robust whereas dealer schemes is a lengthy procedure and has a high risk of delinquency and payment defaults,��� an ICICI spokesperson said.

Consumer durables makers are also concerned over this development. ���Around 15% of our sales come from finance schemes. This year it has dropped by 35%. We are working on alternate avenues to access consumer financing to the customers,��� said LG Electronics CEO V Ramachandran.

Sources attribute the drop in numbers to many reasons: slowdown of the economy, the spurt in interest rates and high default rates. Sales through consumer financing is estimated to be around 8% of the Rs 25,000-crore consumer durables market. ���In the present scenario we will have to hike interest rate by 1% and increase the processing fee for the customers. There is a possibility that the move may impact demand,��� said Future Money CEO Rakesh Makkar.

According to the banking officials, the challenges faced in the financing business in durables segment are high transaction volume business, high operating costs, low ticket size, problems with collection therefore higher delinquency. Consumers have begun deferring purchases for sometime. Croma CEO Ajit Joshi said: ���There is definitely no increase in demand for consumer financing for durables products. Credit cards are seen as a more viable option.���