Banks, Merchants Come Together To Push Festive Demand
Banks are expanding merchant tie-ups and providing incentives for online transaction to boost demand this festive season.
The country’s leading banks have each launched special loan offers and discounts for the upcoming festival season in a bid to bolster retail credit growth and consumption. While waivers of processing charges during this period is commonplace, this year, lenders are going the extra mile to tie up with merchants and offer cash-backs and discounts to lure consumers into purchases.
The offers, rolled out by large lenders like State Bank of India, HDFC Bank Ltd. and ICICI Bank Ltd., will kick-in starting Oct. 1. They come at a time when retail loan demand remains weak. Growth in outstanding retail loans stood at 10.6% in August 2020 compared to 16% a year ago. Incrementally, between March and August, retail loans have remained flat.
"With the economy is recovering gradually, we hope to see a boost in consumer spends," said CS Setty, managing director at SBI.
What’s Different This Year
The Covid-19 pandemic has led to a shift in consumer behaviour with more consumers buying online and paying digitally. And so lenders are focusing their special offers online, too.
For instance, SBI has announced a 100% waiver on the processing fee for all customers applying for car, personal and gold loans through its app YONO. Processing fees for home loans will also be waived across approved projects, the bank said in a statement on Sept. 28.
ICICI Bank is offering a flat processing fee for auto, personal, home and two-wheeler loans, while HDFC Bank is providing borrowers a 50% discount on processing fees for auto loans, personal loans, gold loans and business growth loans.
Consumers have held back on purchases during the lockdown and there is a lot of pent-up demand that has built-up in the system, said Parag Rao, country head of payment business, merchant acquiring services and marketing, HDFC Bank. “We believe by creating a platform like ‘Festive Treats’ we can create demand for our merchants which will help rejuvenate consumption,” he said.
According to a report by TransUnion CIBIL, loan inquires across the board slumped in April-June this year and though such queries rebounded in the July to August period, they were still lower than the pre-Covid period.
For private banks loan inquiry levels between July and August were at 70% of the January-February levels, according to CIBIL. For government-owned banks, they were at 102% between July and August compared to the January-February period.
Bank-Merchant Tie-Ups
Banks are also partnering with a wider range of merchants this year to offer cash-backs and discounts. In particular, offers from merchants in the education, healthcare, groceries, electronics and wellness products space have been put on the table.
HDFC Bank, for instance, said the lender has expanded its network to include over 2,000 offers from merchants in semi-urban and rural India this time around. It has also introduced offers for its merchants to adopt digital payments, in particular the bank is offering a special scheme for merchants to use point-of-sale devices.
Discounts being offered via ICICI Bank and HDFC Bank tie-ups range from 10-60% across a range of goods.
Their emphasis on online transaction is clear.
SBI is offering an instant in-principle approval loan applications processed through their flagship app ‘YONO’. If a borrower applies for the home-loan via YONO, they can avail an additional 5-basis-points interest rate concession, the bank said.
ICICI Bank is providing these merchant offers via its mobile application ‘iMobile’ and its digital wallet ‘Pocket’.
HDFC Bank is encouraging its customers to use its two apps, ‘Payzapp’ and ‘SmartBuy’ to avail the discounts from a large variety of merchants. If HDFC Bank customers use Payzapp and SmartBuy to buy goods on offer from merchants, the bank will reward them with points and gifts. The bank has tied up with merchants specifically to encourage more transactions to flow through the SmartBuy platform.
Also Read: Don’t Expect Deep Discounts At Electronics Stores This Diwali
Asked whether such seasonal offers and programs will help boost lending and consumption activity, Rao of HDFC Bank said a bank can continue growing its merchant business and consumer loans normally during this period. “But by creating this platform we can convince our merchants to use it to drive higher sales and greater top-line revenue for them. And the end result is that we get a far bigger uptick in business during this period compared to if we did not provide these offers,” he said.