May Lakshmi bless you, but debt might be lurking behind

The season of Dhanteras and Diwali has graced us once again with splashes of resplendent lights in the streets, shops with glittering gold, and wallets heavy with that luring spark of spending. It is that time of the year when houses are cleaned, hearts are filled with joy, and a desire to invite Lakshmi, the goddess of wealth, becomes almost palpable. Dressed in all finery, shoppers troop into malls with the determination to take home no less than a slice of that prosperity pie. Happy Dhanteras and Happy Diwali! After all, who can resist the magic of bringing home a new gadget, an exquisite piece of glittering jewelry, or even a few much-needed house upgrades on this auspicious day?

But in the midst of this cheer, the guest nobody invited to dinner is certainly debt—the "borrowed wealth" that often feels as appealing because it's dangerous. It lingers quietly behind every transaction on a credit card or with an unsecured loan. The Reserve Bank of India has blown the whistle on this rising trend, with numbers showing how the easy money fairy tale has started to reveal its darker chapters.

The Festive ‘Growth’ of Unsecured Loans

It is a story already well-entrenched for India's largest private banks. For example, HDFC Bank reported 10 per cent growth in unsecured loans in the September quarter, a respectable rate but also a sign of cautious restraint. ICICI Bank saw a 17 per cent rise in personal loans and a hefty 28 per cent boost in credit card loans.

Personal loans and credit card debt are surging across India's banking sector. Private lenders are reporting significant growth, with personal loans as well as credit card loans rising at double-digit percentage rates. Across public sector banks, too, the trend is no different. Bank of Baroda has registered 25 per cent growth in personal loans over the last year. But this tide of unsecured lending, in part through the ever-growing credit card industry, is not just a statistic. Every percentage point is a silent promise to every borrower, a whispered deal for instant gratification today in exchange for installments tomorrow.

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A Warning by RBI: Prosperity is Purchased with Money

But while the festive months saw a remarkable surge driven by optimism and an enthusiastic marketplace, the RBI has been issuing subtle nudges and not-so-subtle warnings as to the risks that come with these unsecured loans. What started out as "prudent spending" has more often than not proved to be a slippery slope. Low monthly instalments and no-cost EMI options lure customers into spending more, and they often forget the harsh reality that every swipe of the card is a debt owed—and every debt postponed is a gamble.

According to media reports, asked about this on an analyst call, HDFC Bank's CFO, Srinivasan Vaidyanathan, cheerfully admitted to a conscious easing in their unsecured lending rate from 19 per cent last year to about 10 per cent this year. Similarly, the CEO of another private bank seems to have confessed to the pinch of credit stress because of the over-leveraging of certain borrowers. And why not? More often than not, the very customers who wish to welcome Lakshmi home might just find themselves in a rather unholy union with debt collectors. The RBI's warnings are not without grounds. As the consumer continues his routine purchases with facilitated credit cards and personal loans, the specter of unpaid bills and interest works at the rear. While the festive season ignites every sector to spend, unsecured lending has been on the rise, and a third-quarter spurt in NPAs is on the cards.

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Borrow Wisely This Dhanteras

A not-so-sobering thought for this joyous occasion is that while Dhanteras is about welcoming wealth, prosperity, and abundance into our lives, it's also about making choices that invite long-term stability. So this Dhanteras, let's try not to celebrate with additional baggage in the form of debt. Go ahead, pick up that dazzling trinket or add that bit of sparkle to your home, but remember the easiest wealth to accumulate is borrowed wealth—at least until the bills arrive. Let us welcome the goddess of wealth judiciously this time so that her presence may be felt long after the festivity is over. From all of us, here’s wishing you a happy, prosperous, and debt-free Dhanteras-Diwali!