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Household Debt In The Country Not Alarming, Says Report

Household Debt In The Country Not Alarming, Says Report

Household Debt In The Country Not Alarming, Says Report
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Fears around India’s household debt are ill-founded since it stands at 9-10 per cent of the country’s gross domestic product, says a report released by SBI Research. These numbers are not alarming and there is no cause for any concern, the report adds.

"There has been of late a lot of brouhaha over the increasing household leverage in the country. However, such fears are largely unsubstantiated by hard facts,” says the report.

According to the report, however, the household savings rate has dropped by 30 per cent in the financial year 2017 (FY17) from 36.8 per cent in FY08. It would not be right, however, to conclude that this has led to a rise in household debt, the report says.

The problem in the composition in this debt is the structure as many non-institutional sources such as landlords, money lenders and friends & relatives still play an important role in financing, the report adds.

At present, credit from institutional sources accounts for only 3.72 per cent of the overall household debt to GDP of 9.89 per cent while the remaining 6.17 per cent comes from the non-institutional sources.

However, the report suggests the contribution of non-institutional modes of sourcing in financial household debts could drop.

While the real household debt is stagnant, in FY18, household financial liabilities rose to 5.63 per cent from 3.33 per cent, suggesting that large-scale opening of the Jan-Dhan accounts is seen as a changing financial behaviour of households.

With inputs from Housing News

Last Updated: Mon Sep 24 2018

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