India's Middle Class Faces a Growing Debt Crisis
India's middle class is facing a growing debt crisis, with millions taking on loans they may never be able to repay. This alarming trend is fueled by a combination of factors, including rising personal loans, increasing credit card debt, and a growing number of borrowers struggling to meet daily expenses.
According to Saurabh Mukherjea, Founder and Chief Investment Officer at Marcellus Investment Managers, the situation is particularly concerning for subprime borrowers, who have poor creditworthiness and are at a high risk of default. Data from the RBI's Financial Stability Review (FSR) reveals that 45% of India's borrowers fall into this category, and a staggering 48% of their debt is for consumption, not asset-building. This means nearly half of what these financially vulnerable borrowers owe is just to sustain their daily lives.
Mukherjea's analysis suggests that between 5-10% of middle-class Indians are trapped in a debt spiral, where they have taken on multiple loans they will likely never be able to fully repay. This is particularly concerning for individuals with modest incomes who have accumulated loans they simply cannot pay back.
The situation is further compounded by the fact that this issue is not going away anytime soon. As Mukherjea warns, "Each passing year, this problem will get bigger, unless it's actively addressed."
For those struggling with debt, Mukherjea recommends seeking financial counseling before the situation spirals further. By taking proactive steps, individuals can work towards managing their debt and regaining financial stability.