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Household debt almost doubles in 2017-18
Why in the news ?
- According to the data released by the Reserve Bank of India (RBI),
- the indebtedness of Indian households nearly doubled in the year to March 2018, with their financial liabilities rising 80 per cent to Rs 6.74 lakh crore.
Details
- Data showed advances by banks to households soared 71.5 per cent to Rs 4.3 lakh crore, reversing a four-year-long trend of declines in households’ bank borrowings.
- Households may have borrowed less from banks between 2012-13 and 2016-17, but they accessed credit from non-banks whose loans to households rose anywhere between 3 per cent and 9 per cent annually.
- Consequently, the aggregate financial liabilities of households increased every year.
- The leveraging trends reflect the aspirational lifestyles of consumers who are accessing cheap loans to buy products.
- Apart from the change in attitude, by which borrowing is no longer considered to be undesirable, the availability of affordable loans has also pushed up the leverage of households.
Global Scenario
- Although the ratio of household debt to GDP is estimated to have hit a high of 15.7 per cent in March 2017, this is lower than several peer economies.
- The average for emerging market (EM) economies is around 39 per cent.
- Indonesia, for instance, has a per capita GDP which is twice that of India and household debt levels that are similar.
- However, in segments such as two-wheelers, finance penetration is in excess of 70 per cent while that number is 35 per cent in India, an analysis by Morgan Stanley showed.
Source
Indian Express