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% have seen both EMI and tenor increase, according to a survey by Bankbazaar.com Of these, 76% have seen their interest rate increase by more than one per cent.
It is obvious people are increasingly turning fiscally conservative this year as 82% have seen high borrowing costs impact their aspirations, revealed the survey.
The study surveyed 1732 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%) combined with limited savings (44%) and a tax regime not adjusted for inflation (30%).
While 26% have reduced some of their aspirations or decided against pursuing them, 56% are planning to defer their aspirations by 6-18 months or more.
Small ticket-size loans below Rs 5 lakh grew from 49% last year to 54% this year while large loans of Rs 25 lakh and above have come down to 8 per cent this year from 10% 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%, personal loans 28%, and vehicle loans 12%. 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% last year to 56% this year.
This has disproportionately impacted women as retirement planning among women fell from a high of 68% last year to 57% this year. Only 15% of women have a corpus of Rs 2 crore or more. To add fuel to the fire, only 52% of them have mutual fund investments.
The study also observed that on average, women are borrowing more than men: 91% have an open line of credit compared with 87% 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% of women have a loan to buy a house and 25% to upgrade it, while 36% have taken a loan to fund their or a family member’s education, compared to 46%, 23%, and 29% men respectively.
One in four women spend anywhere between 30% to 80% of their income to repay their debt compared to one in four men, found the survey.