‘Indians tend to borrow later in life’: 

‘Indians tend to borrow later in life’: 

Context

• Households’ finance landscape shows near total absence of pension wealth

Committee’s report

• Indian households tend to borrow later in life and are more likely to reach retirement age with positive debt balances, which is a source of risk given that they are no longer earning income during these years, a report of the Household Finance Committee observed.
• Despite the high holdings of real estate, mortgage penetration is low early in life, and subsequently rises as households age.
• This is also at variance with Indian households’ counterparts in other countries as per the reports.
• The Indian household finance landscape is distinctive through the near total absence of pension wealth.
• Pension accounts and investment-linked life insurance products exist only to be used frequently by households located in a small group of states, while in most other states, the contribution of pensions wealth to household wealth is negligible,” reports mentions.
• High levels of unsecured debt, taken mostly from non-institutional sources such as moneylenders was observed.
• With such debt generation, which leads to high costs for Indian households, it is likely to lead to households becoming trapped in a long cycle of interest repayments
• The report notes a large portion of the wealth of Indian households is in the form of physical assets particularly, gold and real estate. But, it said they can benefit greatly by re-allocating assets towards financial markets and away from gold.
• The committee was formed following discussions at the Financial Stability and Development Council headed by Tarun Ramadorai, professor of financial economics, Imperial college London. It had representation from all the financial sector regulators.