EMI life: It's a circle of debt for middle class

NEW DELHI: From instant consumerist nirvana, south Delhi plastic junkie Sumit Khurana woke up one morning to a debt nightmare: a ''collector'' had landed at his doorstep after repeated phonecalls. He refused to budge until Sumit paid the immediate payment due on his outstanding amount of Rs 30,000. Sumit had to take a loan of Rs 1 lakh to pay off the dues on all his credit cards.
Buy now, pay later dearly? For an EMI-living middle class India striving for a good life, easy loans and credit cards have brought closer not only their dreams — house, luxury car, luxury holiday — but also that circle of debt.
"Bad debt is fast catching up with consumers and is becoming a major worry for most banks," says Vijay Mehta of Mumbai-based Credit Card and Management Consultancy. The ''default'' rate — money which is never paid back by consumers — is 8 per cent of all outstanding credit of card companies, and may touch 10 per cent by year-end, he says. Probably the reason why multinational banks now hire three types of agents: for selling, for verification and determining credit worthiness, and for recovery.
"The recent case where a couple committed suicide after killing their kids, is an aberration of course; but bad debt can become a worrisome thing, and is likely to rise," says an executive with a leading MNC bank. The reason? Growing aspirations and a growing economy. "Everybody is living beyond their means. People are buying everything they want — car, home theatre system, house."
It doesn''t matter if your income is as low as Rs 10,000 to Rs 15,000 per month. In fact, entry-level employees form a major chunk of those taking personal loans, says loan agent for HDFC, K K Sharma. "Market mein gol gappa dekhte ho to kha lete hai." (You end up eating gol gappas in the market even if you hadn''t planned on it.)
That''s why banks are aggressively marketing loans. "Earlier 50 per cent of the people didn''t know how to get the money," says Sharma. Besides home loans and car loans — growing at about 40 per cent — there is a huge increase in the number of personal loans also. After Sharma put up an ad in a big office, he has been flooded with calls. "Aaj kal har ek ko paisa chahiye. (Who doesn''t need money today?)