Indian youth moving towards the abyss of debt via consumer loans
The trend of the US had entered the Indian economy almost 2 decades back when the MNCs had set shops in our country and the earnings had gone up manifolds for the youth of the nation. Plastic money, various EMI options, personal loans etc. had given buoyancy to the spending habits of the Indian youth.
Indians are increasingly borrowing from the banks to meet their consumption needs. However ironically, the bottom of the pyramid finds it difficult to access formal finance. However the financial liabilities of the middle class are rising as banks are coming out with a bouquet of products that offer loans on repayments through equated monthly installments (EMIs).
Anything from a home to a cellular phone to cars and even a pet can be bought from funds borrowed from banks. Now anything and everything can be financed and bought in EMIs. The banks are happy as the retail loan portfolio of the banking sector is of about Rs 10.5 lakh crore.
Of this, almost half or Rs 5.5 lakh crore accounts for home loans. This form of loan should be encouraged as it is spent in buying an appreciating asset and the government provides tax exemptions on home loans.
Off late, Indians have also started purchasing white goods such as television, refrigerators and cell phones on credit. This trend will put the spending generation in trouble as the money is used for buying depreciating assets. The banks are tying up with the manufacturers to woo the buyers with attractive schemes. The banks and the manufacturers both are earning revenue from this trend.
The same holds for auto loans. The youth wants to own everything at a young age and this has resulted in a surge in consumer loans.
Source- The Economic Times
