The Indian Way Of Debt

At $82 Billion So Far And Doubling Every Three Years, Is Leverage Among Ordinary Indians Growing Too Fast?

- Samar Srivastava

In 2008, Ryan Marshall planned to buy a television set. What the Delhi-based salaried employee at a private sector company wasn’t prepared for was that he could walk out with one for ₹2 plus a series of payments staggered over the next year at no extra cost. “I was initially intrigued,” he says and “decided to try it out to see if the offer was indeed true.”

He didn’t know it then but Marshall had inadvertently stumbled upon the baby steps India’s financial services industry was taking in allowing Indians to leverage their personal balance sheets.

In the last decade, Marshall has used varying amounts of credit to purchase electronics, furniture, a refrigerator and an air conditioner. What attracts him is the simplicity of the process (no paperwork), its efficiency (disbursals take just a few minutes) and its convenience. The prudent user of credit that he is, Marshall says he always keeps his payments within ₹10,000 a month and always pays offone loan (usually over the course of 12 months) before starting another. He’s also got longer-term loans—a home loan and a car loan. Among his friends he’s noticed an increasing tendency to buy cellphones on credit, he says.

Marshall—and his friends—is clearly not an outlier. The numbers are staggering. Unsecured finance, which includes personal loans and credit card debt, amounted to ₹576,600 crore or $82 billion at the end of FY18, according to data from the Reserve Bank of India. To put that number in perspective, it’s almost double the inflows of foreign direct investment ($44.86 billion) in fiscal 2018. While a part of the $82 billion includes loans by small businessmen to finance the working capital needs of their business, the overwhelming majority goes into financing everyday consumption items.