EMI life: It’s a circle of debt for the middle class | India News

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NEW DELHI: From instant consumerist nirvana, South Delhi plastics junkie Sumit Khurana woke up one morning with a debt nightmare: a ‘collector’ had landed on his doorstep after repeated phone calls. He refused to budge until Sumit paid the immediate payment due on his outstanding Rs 30,000. Sumit had to take out a loan of Rs 1 lakh to pay off the dues on all his credit cards.
Buy now, pay more later? For an EMI middle class Indian living in search of a good life, easy loans and credit cards have brought not only their dreams closer together – house, luxury car, luxury vacation – but also this circle of debt.
“Bad debts are catching up with consumers fast and becoming a major concern for most banks,” says Vijay Mehta of Mumbai-based Credit Card and Management Consultancy. The rate of “default” – money that is never repaid by consumers – is 8% of card companies’ outstanding credit and could reach 10% by the end of the year, he said. Probably the reason why multinational banks now hire three types of agents: for sales, for checking and determining creditworthiness, and for collections.
“The recent case where a couple committed suicide after killing their children is of course an aberration, but bad debts can become worrying and are likely to increase,” says an executive of a large multinational bank. The reason? Growing aspirations and a growing economy. “Everyone is living beyond their means. People buy whatever they want – a car, a home theater system, a house.”
It does not matter if your income is as low as Rs 10,000 to Rs 15,000 per month. In fact, entry-level employees make up a significant portion of those who take out personal loans, says KK Sharma, loan officer for HDFC. “Mein gol gappa dekhte ho market in kha lete hai.” (You end up eating gol gappas at the market even though you hadn’t planned on it.)
This is why banks aggressively market loans. “Before, 50% of people didn’t know how to get money,” Sharma says. Along with home loans and car loans – which are up around 40% – there is also a huge increase in the number of personal loans. After Sharma posted an ad in a large office, he was inundated with calls. “Aaj kal har ek ko paisa chahiye. (Who doesn’t need money today?)

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