Households in India generally, do not live beyond their
means. Traditionally, they have refrained from borrowing to improve their
standard of living. This is unlike the West where household borrowing
is quite common. According to the All India Debt and Investment Survey
(AIDIS) conducted by the National Sample Survey Organisation (NSSO),
31 per cent of rural households and 22 per cent of urban households were
indebted as of June 2012.
Consumer Pyramids indicates a much lower incidence of
indebtedness. Between September and December 2014, it found only 5 per
cent of the households indebted. There wasn’t much difference between
rural and urban regions. Indebtedness was 5.2 per cent in rural regions
and 4.8 per cent in urban regions according to this survey.
The difference does not imply a fall in indebtedness between 2012
and 2014. The two surveys throw up very different estimates of
indebtedness. Five per cent in one and 29 per cent in the other.
However, both surveys agree that the three biggest sources of borrowing
are - banks, money-lenders and relatives & friends. Self-help groups,
again according to both surveys, is a distant fourth.
|Relatives & friends
AIDIS estimates that a little over half of the urban households that have
an outstanding loan have a borrowing from commercial and co-operative
banks. Since in its estimate 22 per cent of the urban households have
an outstanding loan, this implies that a substantial 11 per cent of
all urban households have a bank loan outstanding against them. By a
similar calculation, the AIDIS estimates imply that 13 per cent of all
rural households have a bank loan outstanding against them. Or, one in
every eighth household in India has a bank loan outstanding.
The Consumer Pyramids survey indicates a far more modest penetration
of bank loans amongst households. 30 per cent of borrower households
have a bank loan. Since borrower households are five per cent of all
households, this implies that only 1.5 per cent of all households had
a bank loan outstanding. Or, one in every 67 households in India has a
bank loan outstanding.
Both surveys agree that non-institutional sources of funds, such as
money-lenders, friends and relatives continue to play an important role
in lending to households. Nearly half of the households that have a loan
against them have borrowed from these sources. This shows the limited
reach of banks in lending to households in India.