Rising credit card spends, low loan repayments show struggling middle class
The rising credit card spend, and the steadily declining loan repayments reflect the struggling middle class striving to stay above water amidst the devastating economic crisis the country has ever witnessed.
The average credit card spend is at least about 10 per cent, while the housing loan, repayments are fast declining, top bankers say. Some financial institutions say that this is the same for car loans as well as personal loans. “We have seen credit card sales up by some 70 per cent in some months during the last year. However, we have seen a drastic decline in repayments of housing loans, personal instalment loans etc. This trend is not healthy,” a senior banker told the Business Times on Thursday.
A finance company CEO pointed out that during the past few months vehicle loan repayments have declined really fast.
Most bankers said that during the last few months due to dwindling incomes and the deteriorating liquidity, middle class spenders are stretching their existing credit card limits. “Over the past few months, we have seen a trend of (existing) approved credit card facilities being stretched. Those were card facilities that weren’t used earlier, and these are mostly middle-class spenders,” another banker said. He said that in the present economic, environment, most bankers shy away from granting unsecured credit. As such, there are hardly any extensions of credit limits etc.
He, along with some other bankers, agreed that income levels are challenged which is why the loan instalments are not being paid.
Economists warn that without a single consensus view regarding the bailout package by the International Monetary Fund, the government is creating and contributing to uncertainty and confusion which in turn contributes to interest rate hikes.
“It is important to have one voice to create stability in the already crisis-hit economy,” a third banker said.
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