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At under 10% of GDP, household debt is not alarming: Report

Author: PTI/Friday, September 21, 2018/Categories: Economy

At under 10% of GDP, household debt is not alarming: Report

Mumbai - At a low under 10% of GDP, the household debt in the country is not increasing and there is no cause for any concerns over it, says a report.

“There has been of late a lot of brouhaha over the increasing household leverage in the country. However, such fears are largely unsubstantiated by hard facts which is only 9-10%," SBI Research said.

Though it is true that the household savings rate has declined to 30% in FY17 from a peak of 36.8% in FY08, it is wrong to conclude that this has led to a surge in household debt," it added.

The household debt is low and stagnant during the past few years hovering around in the range of 9-10% of GDP, it said.

The report explained that the problem in the household debt composition is of debt structure, pointing out that non-institutional sources like landlords, money lenders and friends and relatives still play an important role in financing household debt.

Credit from institutional sources accounted for only 3.72% of the overall household debt to GDP of 9.89%, while the rest 6.17% came from the non-institutional sources, it said.

In what can be seen as a positive news, it said the real debt for households is stagnant. In FY18, household financial liabilities increased to 5.63% from 3.33%, suggesting partly the large scale opening of the Jan-Dhan accounts thus changing financial behavior of households.

"This will clearly mean a decline in household debt from non-institutional sources in the coming years," it concludes.

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