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Fewer Indian employees debt-free since 2022, most loans of up to Rs 25 lakh

BankBazaar survey says younger women show greater aspiration to own a home

RBI in talks with Sebi to allow mutual funds to sell debt to ARCs

ILLUSTRATION: AJAY MOHANTY

Surbhi Gloria Singh New Delhi

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More Indian professionals living in the country’s largest cities carry debt than two years ago, according to a survey on spending and financial trends of the formal workforce.
 
BankBazaar’s 2024 ‘Aspirations Index’ covered 1,529 professionals aged 22 to 45 across metro and non-metro cities, It found that 13.4 per cent of respondents were free of credit liabilities, compared to 19 per cent in 2022. Loans of up to Rs 25 lakh comprised 91.2 per cent of borrowing, up from 88 per cent last year.
 
Who was surveyed?
 
The survey gathered insights from respondents in six metro cities and 18 Tier-II towns. The demographic split saw 40 per cent of respondents being women, while 60 per cent were men. These working professionals, all earning at least Rs 30,000 per month, represent the core of India's formal workforce, and are the primary consumers of financial products like loans and credit cards. Most of them are also familiar with digital transactions, having made online purchases or payments recently.
 
 
The survey classified respondents into three distinct groups, based on their career stages and purchasing power:
 
Early jobbers (aged 22-27): These are the newest members of India’s workforce. They are the most digitally savvy, keen on embracing new technologies, and open to exploring modern financial tools.
 
Moneymooners (aged 28-34): Moneymooners have been working for a few years and have higher purchasing power. They tend to focus on bigger financial goals like buying homes, cars, and international travel.
 
Wealth Warriors (aged 35-45): Wealth Warriors are more established professionally and financially. Though not always as technologically savvy as the younger cohorts, their strong purchasing power makes them a target for high-end goods and services, often centred around their families.
 
What do they aspire to?
 
The report highlighted five aspirations respondents had: Wealth, health, relationships, fame, and personal growth.
 
Wealth: Owning a home remains a top aspiration, with younger women showing the highest such ambitions. In contrast, aspirations for travel (84) and retirement (85.3) scored lower, dragging the overall wealth index to 85.1. Women's homeownership aspirations ranked at 88.7, outpacing men's by 5.4 points.
 
Health: Mental and physical well-being are critical for many respondents, with goals like following a fitness regime, maintaining a nutritious diet, and staying mentally healthy standing out.
 
Personal growth: Entrepreneurship is a high aspiration among women, with many looking to start their own ventures. Younger women and men both showed interest in rediscovering hobbies and passions, but women scored higher in entrepreneurship.
 
Fame: The lowest-ranked category overall, fame aspirations, had millennials showing a higher desire to stand out or become influencers. Gen Z men, however, showed little interest in gaining fame, with wealth warriors focusing on more personal goals.
 
How borrowing patterns differ across India
 
When it comes to borrowing, regional priorities differ across the country. In the East, education loans dominate, while the South sees more borrowing for vehicles. Housing loans take the lead in the North and West. Non-metro respondents are more likely to access credit earlier, with 14 per cent taking their first loan between the ages of 18-21, compared to 11 per cent in metros.
 
Additionally, non-metro borrowers are more savvy with their credit cards, with 23 per cent using them to earn rewards or cash back, compared to 19 per cent in metros. Metro residents, on the other hand, rely more on credit cards for emergencies (29 per cent) or large purchases (19 per cent), while non-metro respondents use them more for daily expenses (23 per cent).
 
Aspiration-readiness gaps widen
 
The report showed widening gaps between people's aspirations and their readiness to fulfil them, especially among women. Early Jobber women face a gap of 7 in achieving their homeownership goals, while Wealth Warrior men, who aspire to spend on premium products, face a readiness gap of -7.5.
 
Moneymooner women feel least prepared to meet professional aspirations, showing a 13.3-point gap. On the other hand, Wealth Warrior women (aged 35-45) seem more content professionally, with a smaller gap of -2.1. 
"Indians are increasingly turning to quick commerce and using their credit cards, especially co-branded ones, to meet daily needs. While most are credit-mature, reflected in high credit scores, a new segment of first-time credit users is struggling with managing their credit," said Adhil Shetty, CEO of BankBazaar.
 
"With living costs rising and incomes stagnating – 54 per cent have seen expenses increase by Rs 10,000 to Rs 50,000 per month, while only 43 per cent reported similar income growth – debt dependence is becoming routine for many," he added.
 
Inflation and costs weigh heavily
 
Rising living costs are a significant burden, with 52 per cent of respondents citing inflation as their main obstacle. Family responsibilities (48 per cent) and limited savings (45 per cent) are also affecting people’s ability to meet their goals. Over half of the respondents reported monthly expenses rising between Rs 10,000 and Rs 50,000, while only 43 per cent saw a comparable increase in income.
 
In non-metros, 45 per cent of respondents use credit cards, BNPL (buy now, pay later), or short-term loans to cover monthly expenses, compared to 39 per cent in metros. Consequently, a higher proportion of non-metro residents (22 per cent) find it harder to repay their loans, compared to metro dwellers (18 per cent).
 
Retirement aspirations on the rise
 
Early retirement is increasingly on people's minds, with 31.4 per cent listing it as a top goal, up from 28 per cent last year. However, retirement planning remains a challenge. While 58 per cent of respondents have a retirement corpus, nearly 56 per cent have less than Rs 1 crore saved, raising concerns about financial stability in old age.
 
Women, in particular, face a tough retirement outlook. Though 59 per cent have a retirement corpus, only 57 per cent invest in mutual funds, compared to 65 per cent of men. Many women also rely on endowment plans, which may offer less growth potential compared to other investments.

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First Published: Oct 29 2024 | 2:39 PM IST

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