Expert Speak

Of Middle Class Indians and the Loan Melas

Loan Melas

It is dicey to define the Indian Middle Class. It is safer to assume that it has some common characteristics and includes more or less that section of the salaried class or self employed people who can aspire and attain in their lifetimes to have a own house, own car, and also get their sons/ daughters educated and settled in comfortable jobs, and married off. It includes varying income levels and the people have aspirations to climb the social rungs within a generation.

p____p For the aspiring middle class Indians, the times today are full of hope, courtesy the housing and automobile loans from banks. Banks are falling upon each other in the competition to get the customer.

p____p Attractive schemes, too many in fact, are luring the customers, especially in metros to go in for these heavier investments. When you open the newspapers everyday, you could be floored by attractive car loans, house loan schemes, perhaps offers on some consumer durables like AC, refrigerators etc.

p____p The PC schemes are also there, far and few and sandwiched between these mega offers. The schemes on the PC thus seems to be fighting for the customer�s attention and it does not require the mind of a Sherlock Holmes to guess which way the wind blows.

p____p If you are still with me, I am suggesting that there is a possibility that while the mega sectors of housing and automobiles are spurred on by loan facilities, with low EMIs, customers may not have the depth in their pockets to go in for a PC purchase on loan.

p____p Consumers, who are still yet to own a house, car or a PC may end up prioritizing the former two instead of the latter one. And they could go into EMI commitments spread over quite a few years, thus sealing their ability to cough out any more investments in the foreseeable future.

p____p Thus, while middle class Indians increase their exposure to loans and get squeezed like lemons, paying off monthly EMIs to banks on their housing and auto loans, many other sectors of the industry could experience the ripple effect of losing a section of prospective customers for quite a few years.

p____p While the EMI remains the ultimate financial instrument of spurring growth, the PC industry needs to realize that it may not be a big enough carrot to get the customer. On the other hand, the industry may need to get more out of those segments where people already own a house and car or who don�t have these on their wish-lists (very unlikely), also provided that they don�t yet own a PC. Also there is a need to explore if existing customers want to go in for a second PC. These are the best bets in the home segment.

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