Credit balances are growing, thanks to the increasing demand for credit cards and personal loans.
In an economic slowdown where salary delays and job loss is inevitable, the rise in demand for consumption lending products seems quite obvious.
A recent report shows a spike in outstanding balance on credit cards indicating that people are borrowing to meet their everyday expenses.
According to the India Retail Credit Trends report by TransUnion Cibil, consumer credit grew in Q3 of CY 2019 fuelled by a spike in demand for categories such as personal loans and credit cards.
Demand for auto loans, home loans and loans against property fell between July and September 2019, while demand for consumption lending products increased.
Credit card balances and number of accounts increased by 40.7% compared to 29.8% during the same time last year.
This pushed the total balances to ₹1,090 billion and the number of active cards in circulation to 44.5 million.
New account volumes of personal loans recorded dramatic growth of 133.9% in Q3 2019 as consumer demand for the credit product continued to accelerate, said the report.
Growth in credit cards outstanding is significant at this point of time as it does mean that credit is being used for meeting daily requirements.
Higher use of credit cards does indicate that households in the lower income levels are meeting daily requirements by borrowing.
The Cibil report shows that personal loans balances increased by 28.0% in Q3 2019 compared to the previous year.
India faces stagnant incomes and no jobs in the economy leading to a tendency to depend on credit.
Meanwhile, the decline in demand for passenger vehicles has decelerated the growth of auto loans.
Auto and home loans are seeing saturation as cards and loans are being used for consumption purposes.
People are struggling with the economic slump and depend upon credit cards where the high interest cost works out to over 30% per annum.
The Modi government shows no measures to bring back hope to the economy and nation is being pushed to the dark credits.