Is the economy facing a debt trap?
By Ankit Sharma
Print    Email    RSS   

It seems that India is likely to face a debt trap. The economic boom has seen salaries rise and lifestyles change with people spending a lot on luxuries. Unfortunately, the economic prosperity has also seen a huge rise in personal debts. In this era where one is conscious about his ‘societal status', default rate on credit is also becoming common. Credit card default, home loan default and consumer credit tightening are now frequently heard terms in the market.

Although loans and credit cards make you richer temporarily, it brings with itself a huge burden that will lead us to a Debt Trap.

A crucial driving force of modern economies is the spending by individuals, companies and the government. Another feature is the borrowing to finance this spending. We live in an age of credit cards, corporate borrowing and government budgetary deficits. It is necessary to examine the limits to such borrowing and see whether there are risks of running into debt traps.

Debt trap is a situation where current account deficit increases leading to increases in net debt and interest repayments, which begin a cycle of further current account deficit increases.

Default rate

Without doubt, the delinquency level in the country is on a rise but the prime reason considered for this hike is the rising interest rates over the past. In fact, rates of interest for credit card holders are four times more than the interest rates on home loans. This may be a cause of high delinquency in the card segment in the recent times. The card users are first lured to spend money, which they cannot repay due to exorbitant rate of interest that leads them into a debt trap. Later they are encouraged to convert the outstanding into a loan. The banks do so to avoid an increase to their non-performing assets (NPA), which dents their balance sheets.

People in India are falling behind on paying their EMIs and credit card bills but the overall situation is still way behind from acquiring the status of constitutional and national crisis like it is elsewhere. In UK, the household debt is estimated to be about 109 % of its gross domestic product (GDP) and the consumer debt figure at the end of 2007 was noted to be approx GBP 1,345 billion. Individuals going financially out of order have almost doubled in UK over the past decade. A debt help agency says that in South East England, people on an average are indebted by an amount of 132 % of their incomes. This amount is close to GBP 41,000 in London which is a home to banks, brokers, insurers and legal and accounting firms. However, for the Indian market debt problems have not yet reached a very complicated stage.

Credit cards default is common in the current scenario and going bankrupt or falling behind to make a EMI is a normal thing to happen in a world where extending of credit by the banks and financial institutions is increasing day by day. In any economy where wide-spread use of consumer credit is the accepted norm for spurring demand, there will always be those who will fail to repay their funds.

Debt law

Whenever a debt problem arises, it is very easy for the financial authorities to call on the defaulters but there are no legal options available for the poor people who have turned insolvent. There is an immediate requirement for a detailed law that describes the rights of both the borrower as well as the lender in case of default. It should be designed in a manner that gives minimum pain to all the parties involved along with deleting the need of involving recovery agents to cover the debt.

Although there are ranges of government, commercial and voluntary debt help organizations to manage, recover, and help defaulting consumers and lenders but all of these options only provide temporary solutions to the problem. As soon as one faces trouble, there are options of consolidation of loans, or managed loans, essentially transferring the debt to another lender, may be at a different rate. But this is not a permanent solution and is taking the economy towards a fear of debt trap.

Page  | 123 |  
(Comments Posted : 38) Post Your Comments
1. We are direct providers of Fresh Cut BG, SBLC and MTN which are specifically for lease, our bank instrument can be engage
In PPP Trading, Discounting, signature project (s) such as Aviation, Agriculture, Petroleum, Telecommunication, construction of Dams, Bridges, Real Estate and all kind of projects. We do not have any broker chain in our offer or get involved in chauffer driven offers.

We deliver with time and precision as sethforth in the agreement. Our terms and Conditions are reasonable. below is our
instrument description.

The procedure is very simple; the instrument will be reserved on Euro clear to be verified by your bank, after verification an arrangement will be made for necessary bank documents and stock testing expenses, the cost of the Bank Guarantee will be paid after the delivery of MT760.


1. Instrument: Bank Guarantee (BG/SBLC) (Appendix A)
2. Total Face Value: Eur 5M MIN and Eur 10B MAX (Ten Billion USD).
3. Issuing Bank: HSBC Bank London, Barclays, Credit Suisse and Deutsche Bank Frankfurt.
4. Age: One Year, One Month
5. Purchasing Price: 32% of Face Value plus 2% commission fees to brokers.
6. Leasing Price: 4% of Face Value plus 2% commission fees to brokers.
7. Delivery: Bank to Bank swift.
8. Payment: MT-103 or MT760
9. Hard Copy: Bonded Courier within 7 banking days.

We are ready to close leasing with any interested client in few banking days, if interested do not hesitate to contact me


Skype: MrJohnPaulNowacki


Mr John Paul Nowacki
Mr John Paul Nowacki (Posted: Feb 26, 2018)
2. We are project funder as well as financial lender,We have BG/SBLC, specifically for BUY/LEASE at a leasing price value Issuance by HSBC London and other 25 top AA rated Bank in Europe, Middle East or USA. We also secure funding.

Our BG/SBLC Financing can help you get your project funded, loan financing, please let me know if you are interested in any of our services, by providing you with yearly renewable leased bank instruments. We work directly with issuing bank lease

providers, this Instrument can be monetized on your behalf for 100% funding.

MINIMUM FACE VALUE OF BG/SBLC = EUR/USD 1 million to 5 Billion+

PRICE = 32%+2%

Intermediaries/Consultants/Brokers are welcome to bring their clients and are 100% protected. In complete confidence, we

will work together for the benefits of all parties involved.

Contact Email:

skype: egglerjohnson

Mr Eggler Johnson
Mr Eggler Johnson (Posted: Feb 26, 2018)
3. A nevem Mária Ádám, egy egyedülálló szülő, mielőtt a férjem meghalt, annyi adósságot hagyott bennünket, annyira zavaros és frusztrált voltam, hogy fizetném a hatalmas adósságot. Egy nap átkerültem az interneten, és rámutattam (Jörg Stephen) arról, hogy GINA MORGAN segített neki egy kölcsönt. Így 15 000 000 Ft összegű kölcsönt kértem 5 évig a Társaságtól a postán keresztül ( Amikor a hitelre jelentkeztem, fogadást tettem Istennek, hogy ha megkapom a kölcsönt, a világ tudta, hogy mit tett velem, legnagyobb meglepetésem szerint kevesebb mint 48 óra alatt a hitelem 2% -os kamatlábbal történt. Most a férjem adósságát rendeztem, és új életet és vállalkozást indítottam. Teljesítette az én fogadalmat. Tehát, ha bármilyen típusú kölcsönt szeretne 2% -ig, kérjük, lépjen kapcsolatba GINA MORGAN HITELKERESKEDELMI KFT. E-mail címével,
Mária Ádám (Posted: Sep 22, 2017)
Show All Comments
 Select a product:

 Select a product:

WorldMiles credit card - just another...
Best airline rewards credit cards in...
All about Vintage/Classic car insurance in...
Lost Your Credit Card? Here’s What You...
Be familiar with your Cash-Back Credit Card

I NEED A BLANK ATM CARD 2023, Whatsapp: +18033921735
GET RICH WITH BLANK ATM CARD, Whatsapp: +18033921735
Daawat*Call giℛℒ escort In ZiRaKpUr OOOOOOOOOO...

91st Founders day of the Karnataka Bank Feb 18, 2015
Banks on strike from 25th February Feb 16, 2015
SBT bank postponed the Open House meet Feb 13, 2015
Yes bank planning to line up for credit card portfolio Feb 12, 2015
Pocket banking – new app by ICICI bank Feb 11, 2015
News Archive