FPSB India and IIM Lucknow Unveil “Navigator of Responsible Lending - India”

• Mapping of key banks and NBFCs across small-ticket personal and consumer durable loans

• Axis Bank, Fullerton Credit India, Home Credit India, Standard Chartered Bank excel in “Loan Application process” parameter for Personal Loans

• Standard Chartered Bank and Tata Capital key performers in “Financial Inclusion” for Personal Loans

• Bajaj Finserv, HDBFS and Home Credit India top performers on “Loan Application process” parameter for consumer durable loans

Financial Planning Standards Board India (FPSB) and Indian Institute of Management, Lucknow have released the “Navigator of Responsible Lending - India” – a first of its kind report on the state of Indian consumer lending sector with respect to responsible lending practices. Focusing on small ticket (up to Rs 15,000) personal and consumer durable loans across both banks and NBFCs, the first-of-its-kind research aims to introduce the Indian consumers especially first time borrowers to the concept of responsible lending practices. Conducted from July 2017 - December 2017, it evaluates the performance of industry along five selected parameters of loan application process, lender’s public information, fees & charges, loan servicing and financial inclusion on the basis of information that a consumer would be able to access in public domain, through his loan journey.

From L to R - Panelists - Tomas Hrdlicka, Devashish Dasgupta, Ranjeet Mudholkar, Arun Thukral and Srinath Sridharan

The first edition of the Navigator of Responsible Lending - India seeks to set the standards of responsible lending in India, identifying the key parameters and creating an industry-wide institutional matrix and tool for self-regulation that will serve as the defining contours for responsible lending. Industry players have been evaluated through secondary research of customer touch-points such as website, Points of Sale experience and company literature as well as by speaking to market players across a few geographies for qualitative inputs. It was unveiled in a gathering where eminent names from the industry deliberated on the topic of Responsible Lending: Expectations and Challenges in India.

In the personal loan category, Axis Bank, Fullerton Credit India, Home Credit India, Standard Chartered Bank excel in following a higher degree of responsible lending practices than peers through the “loan application process” whereas only Standard Chartered Bank and Tata Capital stand out for the “financial inclusion” parameter. Almost all the evaluated industry players performed well in the parameters of "Fee and Charges’ and `Loan Servicing’.

Bar Diagram showing Average Score of Financial Institutions dealing in Personal Loans

For consumer durable loans, Bajaj Finserv, HDBFS and Home Credit India are the best performing players for the criterion on “Loan Application Process” whereas ICICI Bank excels in the Financial Inclusion parameter. HDBFS, ICICI Bank and Bajaj Finserv were found to be `Excellent’. HDBFS, ICICI Bank and Bajaj Finserv were found to be `Excellent’ in the criteria of Lender’s Public Information. In `Fee and Charges’ as well as `Loan servicing’, nearly all respondents were found to be `Excellent’.

Bar Diagrams showing Average Score of Financial Institutions dealing in Consumer Durable Loans

Commenting on the research, Mr. Ranjeet Mudholkar, Vice Chairman and Chief Executive Officer, FPSB India said, “Within the context of lending and borrowing, both the parties have mutual responsibility towards each other, to fulfil their respective obligations, with overall objective of making seamless experience for all. The aim of the study is to establish a framework of responsible and healthy relationship, which could result in secured and pleasant experience mutually.”

Speaking on the key outcomes of the research, Prof. Devashish Das Gupta (PhD), Associate Professor of Marketing Management, Indian Institute of Management, Lucknow who led the study said, “The consumer lending industry in India is growing at a remarkable pace, with banks and NBFCs offering “easy” finance options for consumers to buy anything from a mobile phone to a car within minutes. While this is a sign of a progressive and growing economy, we wanted to look at the phenomenon through the prism of globally accepted practices of responsible lending, in light of the customer’s best interest and positive borrowing experience. Responsible lending is about transparent processes, ensuring affordability, transparency of terms and conditions and supporting a borrower to repay loans comfortably. Through this study, our aim has been to explore, evaluate and educate the sector and “Navigate” them towards these best practices. We hope to make this report a regular study and look forward to better industry participation in the future.”

This project has been envisaged and executed with Indian Institute of Management (IIM) Lucknow. Financial Planning Standards Board India (FPSB India) was the validating partner for the project. In many ways, the study, lays the foundations for future editions, serving as the one-stop destination for a variety of aspects related to responsible lending practices in India. Future editions of this study can be carried out on an expanded sample base which would probably yield deeper insights into responsible lending practices. The Navigator of Responsible Lending - India report can be found on www.responsiblelending.in.

Excerpts from Industry Panel Discussion on Responsible Lending, Click here.

About IIM Lucknow

The Indian Institute of Management Lucknow is an autonomous public business school in Lucknow, Uttar Pradesh, India. It was established in 1984 as the fourth Indian Institute of Management (IIM) by the Government of India. IIM Lucknow offers post-graduate diploma, fellowship and executive programs in management. It is recognised as an "Institution of Excellence" by India's Ministry of Human Resource Development. IIM Lucknow also serves as the mentor institution for the newly established IIM Rohtak and IIM Kashipur. The institute has tie-ups with 24 leading Business Schools across the world for student exchange.

About FPSB India

Financial Planning Standards Board India is a public–private enterprise and a professional standards setting body for financial planners in India. FPSB India proactively guides the development and promotion of standards for financial planning professionals to benefit and protect the public in the country. FPSB India closely works with all the stakeholders’ viz. the government, the regulators, the industries/associations, the corporate, the media and the general public to achieve its objectives.