The debt problem faced by young Indians, who are struggling with debt, and the recent data on the increase in defaults in the micro-loan segment, highlight the need for debt management.
What is the impact of Digitalization on finance
In a context where access to credit has increased due to the impact of digital technology, recent data on the borrowing habits of the younger generation is worrying. It has been revealed that there has been an increase in defaults among young people in the micro-loan segment.
This trend has increased particularly in the personal loan segment of less than Rs 50,000. According to data released by credit rating agency CRIF and the Digital Loan Servicers Association of India, one in four loans in this segment are not repaid on time.
Credit Demand
The data also shows that defaults in installments are higher in the sub-10,000 segment. Defaults in micro-loans were 14 percent in 2019, and have increased by 26 percent in 2023. The non-performing loan rate has increased even for loans of one lakh.
Experts believe that this trend needs attention. These types of loans are mostly provided by non-bank financial institutions.
These institutions largely target unbanked customers. These loans are easily available through digital applications.
Meanwhile, the Reserve Bank of India report has also stated that the microfinance sector is facing a crisis in the first half of 2024. It has also been revealed that those who have borrowed from more than one place are facing a greater crisis.
The increase in seeking credit facilities among the younger generation and the difficulty in paying the installments are considered to be due to the trend of credit habits, economic crisis, and lack of financial education awareness.
Debt management
The high cost of living among young people is making them more likely to seek credit facilities. The influence of social media also plays an important role in this. The availability of credit facilities through digital applications and the facility of buying first and paying later are also responsible for this.
Moreover, since many of the small borrowers work in sectors such as delivery services, it is believed that irregular income can cause debt problems.
Experts emphasize that it is necessary to focus on debt management in this context. They say that it is important to take loans according to need and pay attention to the ability to repay when taking out a loan.
Awareness regarding financial education should also be increased. They say that control protocols regarding debt service management are also necessary. In addition, the importance of savings should be emphasized and the need for emergency funds should be emphasized.
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