RBI’s concern about personal loans

A recent statement by Reserve Bank Governor Shashikant Das is much talked about these days, in which he has warned banks and non-banking financial institutions to be alert on the excessive increase in personal loans. On the basis of this statement, rumors have spread as to what is the reason for RBI’s concern. The RBI Governor has also drawn attention to the sudden increase in the use of credit cards these days. There has been more than 30 percent increase in credit card payments between July and August. The figures of another RBI report are even more surprising, which show that this year, the highest increase in personal loans has been recorded so far in comparison to the last two decades, and this amount is in the agriculture, industry and service sectors. Much more than debts.

It is sad that there has been no increase in banking loans to the agricultural sector in the last three decades. At the same time, there was a rise in industrial credit only in the first decade and after that there has been a continuous decline. However, there is continuous growth in the service sector, and that is why the Indian economy is flourishing. With the increase in personal loans, it is becoming clear that these days the common man may not be buying on credit, but is making his purchases through banking loans or credit cards. Many times this discussion is ended by linking it to attraction towards a life of luxury or a blind race to adopt the ways of western countries, whereas the situation is exactly the opposite. Economic analyzes show that the expenses of Indians are continuously increasing compared to their income.

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RBI’s CCS report for the year 2023 also shows that 50 percent people believe that there has been no increase in their income. Whereas 27 percent people believe that their income has decreased compared to last year. It is clear from this that almost 80 percent people feel that their income is not able to match the increase in their expenses. RBI’s CCS report also indicates that about 75 percent of the people believe that their expenses have increased this year compared to last year. About 20 percent people believe that their expenses are the same as last year, and only 5 percent people believe that their expenses have decreased. In the RBI survey, 85 percent people have also said that their expenses on household and daily needs have increased in the year 2023.

Despite fluctuations in inflation figures for some time now, they have remained almost high, whether due to domestic or global reasons. That is, it can be said that on one hand inflation is increasing, and on the other hand the percentage of expenditure of common people is also increasing comparatively. On the other hand, if the person’s income is either the same or has decreased, then surely the financial source to meet the expenses is bank loan or credit card. Apart from this, continuously increasing inflation and decreasing income have definitely reduced the purchasing power, which is not beneficial for the economic condition of the country. Due to this situation, till the month of August in the current financial year, credit card loans of banks and NBFCs have increased by 30 percent, vehicle loans by 20 percent and personal loans by 23 percent. Apart from this, another aspect which is very surprising is that the percentage of unsecured loans has increased in the banking and NBFC sector in the last two years. According to the data, by July 2023, the amount of unsecured loans in the Indian banking sector was Rs 12 lakh crore.

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Today, after India becoming the fifth largest economy in the world, there is a greater need that with the increase in GDP, the income of all Indians should also increase. India also ranks 125th in the world in terms of per capita income. We have to accept that a large part of the increase in profits of a company goes into the pockets of its owners, the rest goes to the shareholders, and only a minimal part goes to the workers. For this reason, the gap between the rich and the poor is continuously increasing in a country like India. Now India has become the world’s most populous country, leaving behind China in terms of population, but the ever-increasing unemployment and inflation rates have put almost 80 percent of the society in financial trouble. Perhaps Governor Shashikant has assessed the future consequences of this current situation to be like America’s recession caused by the 2006 debt crisis, and hence he cautioned banks and other financial institutions to be cautious about their internal financial system. Is.

(These are the personal views of the author)

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