Rising loan defaults hit smartphone financing as brands push premium upgrades: Report

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As brands and retailers push premium smartphone sales through easy financing schemes, delinquency rates are climbing across India’s consumer durables segment, reported the Economic Times (ET).

The default rates on mobile phone financing now range between 2.7% and 2.9%, higher than the expected 2%, the report added.

In areas with higher default rates, financing companies are reportedly downgrading store ratings and restricting loans to only customers with good credit scores. ET cited executives saying that regulatory curbs, such as Karnataka’s rule barring recovery agents from collecting dues after 6 PM, have also prompted lenders to block entire high-risk PIN codes.

“Delinquency rates vary between various NBFCs and private banks, but have been on the rise. Around 2.7–2.9% of all loans given for mobile phone purchases default every year. A rate of 2% is generally expected,” a sales executive told ET.

The rise in defaults comes as one in every three smartphones is now being bought on credit, with brands using affordability schemes to encourage upgrades, according to Counterpoint Research.

Consumer durable loans, which include smartphone financing, grew just 3.3% year-on-year to Rs 1.6 lakh crore in FY25, compared to an 18% rise in FY24, according to a CRIF Highmark report quoted by ET. Smartphones typically account for about a fourth of these loans.

The CRIF report highlighted that the portfolio at risk for 31–90 days rose to 1.3% in FY25 from 1.2% a year earlier, while defaults beyond 180 days increased to 2.1% from 1.9%. Smaller ticket loans under Rs 10,000 showed the highest delinquency rates at over 2%, while loans above Rs 50,000 saw relatively lower defaults.

The report further said that brands are bearing the financing costs of no-cost EMI schemes, with one industry executive estimating that brands pay between 6% and 11% of the product’s cost, depending on the loan tenure and benefits offered.

Retailers, too, are under pressure from NBFCs to manage delinquencies. “If a customer fails to pay, the NBFC might threaten to block the retailer’s operational code. Sometimes, we even cover initial payments on behalf of defaulting customers to avoid losing business,” a Delhi-based retailer told ET.