Loans, rather than family support, the way out of financial problems

There is one difference, though: while rural households rely the most on the village moneylender (more than 12 per cent), urban households depend more on relatives and friends for loan support (8 per cent). At the bottom of loan sources are chit funds (around 1 per cent) and trade unions (less than that).

Backing this behaviour is sound and ground logic. While less than 9 per cent of the people ticking the loan option are over 50, the numbers are higher for those below 30 (15.8 per cent) and the highest for those between 30 and 50 (30.8 per cent).

The older people seem less inclined to take debt probably because of fewer working years ahead of them, while those in their 20s might not be making enough to pay back. That leaves the 30-50 bracket—settled in their careers and many working years ahead.

One would expect wealthier citizens would have greater confidence to take a loan and get it with ease, but it’s the poorer people who choose to borrow.

Households making more than Rs 2.5 lakh and choosing loans accounted for only 0.5 per cent of the sample. The figure rose to 3.3 per cent for incomes between Rs 1 lakh and Rs 2.5 lakh and to 6.1 per cent for those making between Rs 60,000 and Rs 1 lakh. It is households making less than Rs 5,000 a month that had the highest contributors to the loan option: 45. 6 per cent — perhaps they borrow because they have no options.

Conducted by AC Nielsen ORG MARG for the Finance Ministry, this survey breaks another myth: leaning on the family to tide over bad times is neither the first nor the second choice of Indian households. After taking a loan, the next best option exercised by households is to eat into savings—about one in four households choose to spend from their savings.

Depending on the family is a poor third choice, garnering a support of just 7.6 per cent—most of it being exercised by males (6.3 per cent) and largely urban (4.3 per cent). A big chunk comes from people under 50 (6.5 per cent) or making less than Rs 5,000 a month (6 per cent).

The relationship between educational qualifications and income, and depending on the family seems inverse: 1 per cent of all graduates and above, and 0.1 per cent of those making more than Rs 2.5 lakh per annum opt for the family.

This data, however, clashes with the findings of the National Sample Survey Organisation (NSSO) released on May 3. According to NSSO, the most important source of loan is banks (36 per cent); moneylenders follow next at 26 per cent.

In its report No. 498 titled ‘Indebtedness of Farmer Households’, which surveyed 51,770 farmer households, it says 48.6 per cent of them are indebted. Expenditure on the farm accounted for 58.4 per cent of outstanding loans, while marriage and ceremonies accounted for 11.1 per cent.

PART I

PART II