Household Debt In India


Financial liabilities of Indian households have gone up sharply from Rs 31,779 crore in FY01 to Rs 2.74 lakh crore in FY12. The decade saw two major trends leading to a sharp rise in consumption expenditure. Home loans have now become popular with no stigma attached any more.The age bar of people opting for home loans has come down from those in mid forties to early thirties.Moreover, the very young have got addicted to credit card spending, leaving them with very little to save.

So guess why the real estate prices refuse to head south?And “premium”versions of  consumer goods and services is the focus of businesses operating in India?

Have your financial liabilities increased in this decade?What assumptions are you making when you borrow more?Can you still manage safely if your assumptions fail?

About Keerthika Singaravel

4 Responses to Household Debt In India

  1. Alex Jones says:

    It is interesting to see the debts rise 2006-07 then fall for two years by a large margin, then start rising again.

    • The crisis of 2008 caused job losses and banks called in many loans. ICICI bank,2nd largest bank and with the largest consumer loan portfolio, was rumored to be sunk because of its association with American banks and this led to panic withdrawals. The bank in turn shrunk its credit card portfolio.Many mortgages became NPAs and properties securitized. This explains the drop in indebtedness.Then the government pump primed the economy by making loans cheap.This led to credit off take but no growth shown by rising indebtedness initially.Lately no matter what banks do to push loans there are few takers.The economy is stalling,inflation stubbornly high,loans seem expensive and everybody finds themselves a little short of cash.So indebtedness is fixed.But this data is unlikely to capture the real picture of indebtedness in India.Bank loans call for extensive income documentation,something most people don’t have.So many loans must originate in the informal market-from chits,credit societies,gold loans,money lenders,loan sharks et al. After investigations,the high rate of suicides in AP was found to be because of over indebtedness of marginal farmers who had taken multiple loans from different micro-credit societies and got stuck in a debt trap.

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