Covid Hit 40% Of Jobs, Borrowing Rose 50% : Survey

While there is a rise in the number of people taking loans in 2021, the sharp decline in household borrowing indicates a transition from need-based to desire-based borrowing.

Outlook Web Desk

Updated on: 17 November 2021 2:21 pm

Covid Hit 40% Of Jobs, Borrowing Rose 50% : Survey

With Covid-19 outbreak, there have been job loss and severe pay cuts among thousands of people, pushing them into taking loans. Nearly 40 per cent of people had an impact on their job, finds a recent report by Home Credit, an international non-bank financial institution.

While people from Bangalore were least affected in terms of job, the ones from Mumbai seem to be the worst hit, in terms of financial stability. The study was conducted to do a comparative analysis between July to August in 2021 and during the same period in 2020. More than 90 per cent of the respondents have monthly income below Rs 30,000.

The report says that nearly half of these affected people across major cities of India, including Delhi, Jaipur, Bangalore, Hyderabad, Bhopal, Mumbai, Kolkata, Patna, Ranchi, have gradually recovered and some are still regaining their financial status, yet the tendency of taking loans continues among many even after two years of the pandemic outbreak. There has been an increase of 50 per cent in borrowing in 2021 as compared to 2020. Although, there has been a shift in the borrowing pattern; in the previous year, nearly 85 per cent of loans were taken to meet basic needs like running the household, paying bills, school fee etc, while this year, most of the people have opted for loans to expand or start a new business or for corporate deposits (CDs). The sharp decline in household borrowing indicates a transition from need-based borrowing to desire-based borrowing. Moreover, among the new borrowers, nearly 40 per cent are millennial, willing to jump the online loan journey mode versus traditional offline channels for future borrowings.

As per the report, more than 50 per cent of the respondents took loan for their business or for CDs. Mumbai being the city with one of the least financial stability after Covid-19 outbreak; it has comparatively larger section of people taking loans to run households even in 2021. But Bangalore has the maximum number of respondents taking CD loans, while Hyderabad has the highest number loans issued for business purposes.

“This resilience of consumers is reflected in the rise in business loans borrowing, home renovation and other positive reasons versus primarily borrowing for meeting household & family needs in 2020,” says Vivek Kumar Sinha, Chief Marketing Officer, Home Credit India.