Professional Documents
Culture Documents
CONSUMER FINANCE
GROUP MEMBERS
n Manali Jain(02)
n Sneha Gohil (11)
n Pooja Bhatia (22)
n Abbas Zaidy (35)
n Foram Shah (46)
n Khushboo Jain (60)
INTRODUCTION
n Consumer finance has been acknowledged as a growth
sector by banks.
n Aggressive marketing and establishing a client relationship,
is the key to success in consumer financing.
n Nonbanking finance companies are big players in consumer
credit.
n Citibank is pioneer in consumer credit and retail banking.
MEANING
n Consumer finance in the most basic sense of the word refers to
any kind of lending to consumers.
n In the United States financial services industry, the term
"consumer finance" often refers to a particular type of
business, sub prime branch lending.
n Consumer Finance Companies attempted to lend to everyone
who would accept their high rates of interest. branch
lending because
n Banks made it difficult to obtain personal credit.
n Many people simply didn't like to deal with bank
employees and branches
n Consumer finance companies focused on lowering the
DEFINITION
n Consumer Finance
n The division of retail banking that deals with lending money
to consumers. This includes a wide variety of loans,
including credit cards, mortgage loans, and auto loans, and
can also be used to refer to loans taken out at either the
prime rate or the subprime rate.
n Consumer finance Company
n A financial institution that specializes in providing loans
directly to consumers who are unable to secure bank loans
is called as Consumer Finance Companies. A consumer
finance company generally charges a higher interest rates
than a bank.
n Examples of these companies include American General
Finance, Inc., Duvera Financial, Inc., Lendmark Financial
EVOLUTION OF THE CONSUMER
FINANCE MARKET
n From colonial times through the early twentieth century, most people
had quite limited access to credit, and even when credit was
available, it was quite expensive.
n Moreintense industrialization and urbanization during the late
nineteenth and early twentieth centuries dramatically changed
the market for small consumer loans.
n Early in the twentieth century, many new organizations that focused
exclusively on the needs of consumers entered the field, and the
structure of consumer finance began to change dramatically.
n By the 1930s, a wide array of lenders served consumers, including
credit unions, small local savings banks, and a nationwide
network of statelicensed consumer finance companies.
n Market demand and growing competition among this wider variety of
lenders spawned further innovation, which started the era of
Credit Cards
n As early as 1900, some hotels began offering credit cards to
their regular customers.
n By 1914, gasoline companies and large retail department
stores were also issuing credit cards to their mostvalued
patrons.
n In the 1950s, commercial banks entered into the credit card
business.
n After the creation of the Federal Housing Administration a new type
of mortgage loanthe longterm, fixedrate, selfamortizing
mortgagegrew up around this one product.
NEED FOR CONSUMER FINANCE
n Need for consumerism
n Fast growing in India, offering excellent scope for lending.
n To purchase necessities like television, refrigerator, scooter,
etc.
n To increase the profit margins of consumer finance
companies and banks
n To expand credit in the market
n For smooth asset liability management
GROWTH IN CONSUMER
FINANCE
n The opportunities and challenges posed by the consumer finance
market in India are enormous as the it is world’s second most
populous nation.
n Six years ago, 40 per cent of consumer durables were financed; this has
gone up to 70 per cent today. Yet, consumer finance is just 2.6 per
cent of GDP.
n There are many factors contributing to this change rising literacy,
exposure to global trends and lifestyles.
n Due to shift in consumer attitude towards taking a loan they can
benefit from the range of finance schemes offered by financiers, tax
benefits, higher loan eligibility and availability of a wide range of
products at different price points.
n e.g. Personal loans i) Loan amount from Rs. 25,000 to Rs.
5,00,000
ADVANTAGES
n
n Convenient
n
n Emergencies
n
n Large Purchases
n
n Builds Credit
n
DISADVANTAGES
n
n Temptation
n
n Unrealistic Lifestyle
n
n More Expensive
n
CONCLUSION
n Consumer financing business in India has been on an uptrend
recently and is expected to remain so in the future.
n Till now most of the growth has come from traditional channels of
financing. But going forward, banks and NBFC alike need to
search for other avenues for sustaining the momentum.
n This growth can come from areas like developments in rural finance,
widened gamut of credit card offerings, education, partnerships
with Multi Brand Outlets etc.
n In Asia Pacific, India has emerged as the third largest market for
cars and MUVs i.e. only after Japan and China.
n The last few years have witnessed a high increase in students
aspiring for management and professional courses, leading to a
spurt in educational loans.
n The number of students availing education loans has increased to
1,40,000 from 1,08,000 during this period.
n the loan requirement from larger cities will continue to grow,
explosive growth in credit is expected to register in tier II cities,
semiurban and rural areas.
n The last few years have witnessed a high increase in students
aspiring for management and professional courses, leading to a
spurt in educational loans.
n The number of students availing education loans has increased to
1,40,000 from 1,08,000 during this period.
n the loan requirement from larger cities will continue to grow,
explosive growth in credit is expected to register in tier II cities,
semiurban and rural areas.
YO U !
H A N K
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