Lending seems to have taken a hit in the past year or so and while the interest rates are only a part of the picture, the main issue is something even graver.
There was a time when EMI was an easy word. Things were available on EMI and the term was not just associated with Home Loans and Car Loans but also with various goods and services, even things of personal luxury like an expensive smart-phone was available on EMI and people were just queuing up for it. So has all that changed now? Well, yes and no. No because most of the schemes still exist and so there is no change there. Yes because there less takers of such offers now and that has changed. There are lesser and lesser number of people opting for loans or credit for that matter. And the reason is primarily – JOB UNCERTAINTY coupled with inflation and higher cost of living and higher interest rates.
The main areas where the loans have taken a hit is in the consumer goods loan since people realise that not owning a particular item is OK for now, credit card loans since credit card interest rates are way high and that just easily snow-balls into a debt trap. Loans against FDs have also taken a hit, since due to the job uncertainties there is always the looming fear of unemployment, pay-cut. Industry body Assocham had conducted this survey. The slow economy and high inflation hasn’t helped either. The overall scenario of our country is to be blamed but by and large JOBS or the lack of it, is the main deterrent for people choosing to NOT take loans.
Well, all is not bleak since there is always a silver lining. The good thing is people are learning to live within the means and not splurge in things that are, well, unnecessary. There is always some good to come of things however apart from people not taking unnecessary loans and spending unduly there is no major good here. The reason being, had people voluntarily been not taking loans even while the economy was good and jobs aplenty, would have been a sign of informed spending decisions, however here the reasons are pretty disturbing for the nation. Jobs are vital, and currently that is not that easily available.
Think of it, today’s youth is struggling to find good jobs, also just because IIMs and IITs etc have campus placements doing OK doesn’t reflect the whole nation. There is life beyond IITs and IIMs and hence other fields too need job opportunities. Till the time that happens we as a nation cannot claim economic growth. Apart from the loan seekers, even banks are skeptical of lending to corporates due to the same reason of non-payments, losses pilling up, bad credit scores and non-promising economy. So if the companies have difficulty in gaining funds, that again hampers its growth and in return the job creation. All this in totality is affecting the habits of people towards opting for loans.
Whoever comes to power in 2014, they better prioritize empowering the youth with Job opportunities before any other agenda, since that in itself would lead to a better economy, better spending and in turn better business. It is a cycle.