 "Home loan, EMI")
Rising inflation and interest rates have had a big impact on people’s pockets. Around 74 per cent have seen their loans become more expensive, while 42 per cent have seen their EMIs go up and 21 per cent have seen both EMI and tenor increase, according to a survey by Bankbazaar.com Of these, 76 per cent have seen their interest rate increase by more than one per cent.
The hike has been more than 3 per cent for 21 per cent. That’s an increase of Rs 0-2,000 for 26 per cent of people, and Rs 2,000-10,000 increase for 50 per cent.
The percentage of people taking loans to build assets such as a house, vehicles, or even for higher education and home improvement, has fallen by 2-3 percentage points due to a steep increase in the cost of credit in the last year, while the number of people servicing loans taken for medical and other emergencies has gone up by 3 percentage points.
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It is obvious people are increasingly turning fiscally conservative this year as 82 per cent have seen high borrowing costs impact their aspirations, revealed the survey.
The study surveyed 1,732 respondents from 6 metros and 18+ Tier 2 cities of India. This year's study covers working professionals aged between 22 and 45 years.
High inflation and soaring costs of capital continue to hamper aspirations. The high cost of living is the biggest roadblock (48 per cent) combined with limited savings (44 per cent) and a tax regime not adjusted for inflation (30 per cent).
While 26 per cent have reduced some of their aspirations or decided against pursuing them, 56 per cent are planning to defer their aspirations by 6-18 months or more.
The percentage of people without any open credit liability is down to 14 per cent from last year’s 19 per cent.
Small ticket-size loans below Rs 5 lakh grew from 49 per cent last year to 54 per cent this year while large loans of Rs 25 lakh and above have come down to 8 per cent this year from 10 per cent in 2022.
"Borrowers being under stress mimics larger trends playing out globally. In the wake of the pandemic, central banks around the world and in major economies printed money to drive down interest rates and boost economic sentiment. What followed were bubbles in various asset classes and elevated inflation. While the pandemic has receded, inflation remains at elevated levels. Central banks are now countering inflation by mopping up of excess liquidity from the markets through various tools of monetary policy such as policy interest rate hikes," noted the study.
In India, the outstanding retail credit market stands at Rs 42 trillion, of which home loans account for 47 per cent, personal loans 28 per cent, and vehicle loans 12 per cent. India had tremendous growth in all loan segments through 2021 and 2022. But in 2023, this growth is slowing. The interest rate hikes have done their bit.
Even the percentage of people with a retirement corpus has shrunk from 60 per cent last year to 56 per cent this year.
This has disproportionately impacted women as retirement planning among women fell from a high of 68 per cent last year to 57 per cent this year. Only 15 per cent of women have a corpus of Rs 2 crore or more. To add fuel to the fire, only 52 per cent of them have mutual fund investments.
The study also observed that on average, women are borrowing more than men: 91 per cent have an open line of credit compared with 87 per cent of men. While more men use credit cards, women have more secured and unsecured personal loans and gold loans. More women have an ongoing home loan and education loan compared to men: 48 per cent of women have a loan to buy a house and 25 per cent to upgrade it, while 36 per cent have taken a loan to fund their or a family member’s education, compared to 46 per cent, 23 per cent, and 29 per cent men respectively.
One in four women spend anywhere between 30 per cent to 80 per cent of their income to repay their debt compared to one in four men, found the survey.
