Rising household indebtedness a concern: report - Moneylife

Rising household indebtedness a concern: report - Moneylife



My VIEW:





Those who have a regular income are also prone to borrow regularly. Personal loans and credit cards trap this category of borrowers in a 'vicious cycle'. I was a 'victim' of this behavioural pattern till retirement in 2003. Though interest rates were reasonably low as I was borrowing from staff cooperative credit society. I give below an excerpt from my forthcoming article in The Global ANALYST to illustrate the trap:
"What is negative interest rate for the consumer?
For starters, let me explain this concept with an example. Fish-vender Arundhati from a small town in Kerala has been selling fish by carrying headloads of fish from house to house for the last 25 years. Today, she buys fish costing about Rs3,500 from the wholesale market, transports it in an auto-rikshaw to her town and makes about Rs5,000 by evening by sale by carrying from door to door. Whole her life, she has been dependent on ‘Blade Bhasi’ a local money lender. Every Monday morning she borrows Rs5,000 and repays Rs5,500(including Rs500 towards interest) on Saturday evening. In this process, if the original Rs5000 belonged to Arundhati, the additional Rs500 paid is the negative interest she is paying to Blade Bhasi for safe custody of Rs 5,000 from Saturday to Monday. If the corpus of rs5,000 belonged to Blade Bhasi, the interest paid by Arundhati on the borrowed money @Rs500 per week on rs5,000 is at around 500 per cent per annum."
Your views are welcome.
mgwarrier@gmail.com

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