Presentation on

Consumer Finance in India

Presented by

Javed HussainKirti JindalKarishma BhandariGarima DubeyGarima SwamiHitesh RajpurohitGaurav yadavHitesh Jeengar

Contents• Defination• Durables which are financed• Growth of consumer durables• Future prospects of consumer finance• Consumer finance growth drivers• Consumer finance in Rural market• About Bajaj Finance• Organizational Hierarchy of Bajaj Finance

(Contd..)

• Document required for financing• Interest rates of finance• Basis of Segmenting market• Legal Procedure• Situation of cases• Limit of Finance• Process of financing in Bajaj Finance• Conclusion

DefinationConsumer finance in the most basic sense of the word refers to any kind of lending to consumers. One of the best ways to get the unsecured loans is through the consumer finance.

Durables which are financed

• Television• Washing Machine• Air Conditioner• DVD/VCD players• Refrigerator• Computers/laptops• And other consumer durables

Growth of Consumer Durables

• Cyclical & Seasonal Demand• Demand in Rural India• Consumer Awareness & Preference for new

models• Attractive consumers loan schemes• Growth of Media• Use of Internet by Market Functionaries

Future prospects of Consumer Finance

• Growth of GDP• Opportunities in Rural Market• Schemes of Banks & Financial Institutions• Increasing Consumer Awareness

FICCI Research

• Report-

1. Attractive Schemes 2. Phenomenal growth of Media3. Use of Internet4. The ability of Imports5. Reduction in Import duties and Input costs • Table of Projected growth in Prodction

Projected growth in production of Consumer Durables(Table)

• Refrigerator - 5-10%• Air conditioner - 20-25%• Washing Machines - 5-10%• Microwave Ovens - 25%• Consumer Electronics(overall) - 9%• Colour televisions - 15-20%• Black & White televisions - 20%• VCDs/MP3 - 30%• DVD - 25%• Clock - 10%• Watch - 10%

(Source-FICCI report 05-06)

RURAL MARKET AND CONSUMER FINANCE

• Sales were high during festive season.• Rural people feel ease in giving installments

instead of single down payment.• Rural persons found consumer loans useful

because consumer durables are used for productive purposes.

PROBLEMS FACED IN RURAL SECTORS

• Process of sanctioning loans,documentation and formalities takes too much time.

• Higher interest rates for quicker sanctioning of loans.

• People want advance information about the documents needed for taking loan.

RECOVERY OF LOANS

• Recovery of loans is the toughest job in rural area.

• Recovery rates are higher in co-operative banks.

• Schemes for hardcore defaulters discourages the consumers who pay on time.

About Bajaj CapitalBFL was created by the three-way demerger of Bajaj Auto, inheriting the insurance and finance businesses. Now, it is into consumer finance through listed firm Bajaj Auto Finance. It is also into general and life insurance businesses in JVs with Allianz. Bajaj Auto Finance, which initially financed purchases from Bajaj Auto, is now changing into a consumer finance firm. Last year, auto finance brought 55% business while 45% came from personal loans and financing consumer durables and PCs.

Organization Hierarchy

• There are four Departments:• Sales • Operational• Credit • Collection

Hierarchy of Sales DepartmentSales Dep

HOD

6-8 Exec.

3-5 TL

2-3 Member

Documents Required

• ID• Income Proof • Address Proof

Interest Rate For Dealer 0% rate For consumers on Durables 5%-8% rate Maximum 11%

Segmentation of Market

Step 1 –Segmenting Market on Basis of Cities

Step 2 –Grading Cities

- A Grade- B Grade- C Grade- D Grade

Step 3 –Designing Schemes Acc. to to Grades given

Legal Procedure

Reserve Bank of India has told banks that the recovery agents appointed by them cannot re-possess by resorting to illegal means, vehicles or property or any other goods, in case of defaults by borrowers.

Situation of Cases

Previously -Till Oct 07 – 700 to 800 cases per Month

Action Taken - Income proof made Essential

Now - 152 Cases Per month

Limit of Finance

• Minimum Limit is of Rs.7000• Maximum Limit is of Rs.500000

Base for deciding limit- Self Employed - 60000 in ITR- Salaried person – 5000 per mth

Process of consumer Finance• Consumer meet with dealer

- Purchase decision- Filling of form- Submitting documents

• Transfer of document from dealer to finance company• Checking of details by Operation Department• Transfer from Operation to Finance Department• Finance given to customer • Finally Collection Department collects the installments paid by

customer(In case of default on finance collection department take legal action against customer)

Conclusion

There are many organizations in the world which are providing consumer credit services which are helpful for the financial stability. Financial stability is very important not only for the businesses but also for the consumers. The businesses and as well as the consumers need the stability regarding the financial matters because without the stability no one could be very innovative in the longer run.

Special thanks to

• Bajaj Finance – Manish Parekh

Sources of Information

- Bajaj Finance- FICCI Report- Internet