Benchmarking study of Indian consumer finance market against the emerging Asian as well as matured western markets

Abstract

Ever since the economic liberalization of India, the private and public sector banking industry has undergone a sea change in terms of the products and services offered, customer penetration, customer service, operational efficiencies and competitiveness. The last decade has experienced a deluge of foreign and domestic private sector banks, and a facelift of public sector banks in India. Yet the credit market in India hasn't seen the kind of spectacular growth that has been experienced by other emerging markets like Taiwan, South Korea, and Hong Kong and matured markets like USA, UK and Germany. Just to emphasize the gravity of the issue, the penetration of household debt as a percentage of GDP is in the excess of 60% in Taiwan whereas the same ratio for India is only 7-8%. This discrepancy calls for an investigative study to asses India's potential vis-a-vis these international markets and understand the factors holding back India's growth. This research study purports to delve deeper into these macroeconomic, policy and regulatory, and financial factors to gain insights (mentioned below) into the Consumer Finance markets potential of India bench marked against the Asian (Taiwan, South Korea, Hong Kong, Malaysia and China) and Western ( USA, UK, Germany) markets. Objectives The primary objectives of commencing this study are: To perform a comparative study of Indian Consumer Finance Market against Emerging Asian countries Taiwan, South Korea, Hong Kong, China and Malaysia, and some of the Matured western countries viz. USA, UK and Germany to analyze and understand the reasons for disparities in the growth of consumer finance and credit penetration levels across these countries. To identify, define and analyze some key metrics across three main product categories viz. Mortgages, Credit cards and Personal/Consumer loans, that can help in performing the above mentioned benchmarking study. To segregate the above mentioned metrics estimates for top 20 Indian cities from the consolidated available similar figures for the whole country and to estimate the Risk adjusted spread / ROE ratios for different product categories for top 20 Indian cities along with India and International markets (Taiwan, South Korea, Hong Kong, China, Malaysia, USA, UK and Germany). To analyze and understand the key important product wise parameters driving their growth for Indian market vis-a-vis the International markets. To analyze and understand the major financial debacles recently happened in Asian and Western markets like US sub prime mortgage crisis, Hong Kong's personal bankruptcy crisis and South Korea's credit card default crisis under the following heads o Background o Impact on the economy and financial markets o Analysis (triggers) o Government and other regulatory reactions