The growing problem of consumer bad debt in India

 

India is well-known for its rapidly expanding economy. However, in India, there is a growing concern that is putting a damper on this success: bad debt from consumers. This issue has been rapidly worsening over the last few years, and it shows no signs of abating anytime soon.

But why is bad debt among consumers growing exponentially?

This rise in bad debt can be attributed to a number of factors. One explanation is that in order to keep up with the country's high cost of living, many Indian consumers are taking on increasing amounts of debt.

Many people are struggling to make ends meet due to rising costs of petrol, electricity, education, and healthcare, among other things. As a result, many are resorting to credit cards and other forms of debt to meet their financial obligations.

Another factor contributing to the rise of bad debt in India is that many Indian consumers are unaware of the risks of taking on too much debt. They don't realise how important it is to pay off their obligations on time, and they frequently fall behind on their payments.

Consumers may suffer catastrophic consequences as a result of this. Not only are they at risk of having to pay hefty fines and penalties, but their credit ratings may be harmed as well.

The Covid 19 pandemic has only made things worse. Many people have lost their jobs as a result of the pandemic, and they are now struggling to pay off their debts. This can have serious consequences for both the individuals involved and the overall economy.

So then what can be done in order to resolve this issue?

This issue does not have a simple remedy. One thing that must be done, however, is to educate Indian customers about the perils of excessive debt. They must be made aware of the risks and instructed on how to properly manage their finances.

Making it easier for people to pay off their debts is another thing that has to be done. This might be accomplished by giving more flexible payment plans and additional aid to people who are having difficulty repaying their loans.

In order to grow their business and earnings, banks and financial institutions lend money to enterprises and businesses who don't have the financial means to repay them. So, before carelessly lending money to companies and firms, banks must first analyse and cross-check their financial records and prior performance to see if they are even capable of repaying them.

Banks must also follow RBI standards in their recovery efforts and desist from abusing financially distressed customers. Unfortunately, there are far too many instances of recovery agents bullying and abusing consumers, in direct violation of RBI instructions and guidelines and many Supreme Court decisions.

Whatever steps are adopted, it is critical that the government and other parties (stakeholders) collaborate to solve the problem. It might have catastrophic consequences for the Indian economy if left uncontrolled.

 

AUTHORS:

Aditi Kulkarni (1212210010)

Research Scholar’s,

B.Sc. Economics

Dr. Vishwanath Karad MIT-WPU