The allure of mega sale seasons from e-commerce giants and other leading online retailers captivates young consumers, especially when they see enticing offers like ‘buy now, pay later’ (BNPL) and the option to pay by credit card in easy EMIs (equated monthly installments) over a period that can extend up to two years. Suddenly, a phone or a laptop worth Rs1 lakh or a holiday worth R2 lakh becomes an appealing purchase available at a fraction of the initial payment. While this may sound fine on the surface, such consumer behaviour – particularly among millennials and Gen Z, who view technological gadgets as essential and travelling as a privilege – has snowballed into a colossal pile of non-performing assets (NPAs) that is ringing alarm bells. As of June 2024, outstanding credit card balances had skyrocketed to Rs2.7 lakh crore, up from Rs87,686 crore in the pre-pandemic 2019. This translates to a compounded annual growth rate of 24 per cent over five years. Data from TransUnion Cibil indicates that credit card defaults are also on the rise, with a default rate of 1.8 per cent as of June 2024, up from 1.7 per cent just six months earlier. This sharp increase is driven by an 81 per cent rise in credit card adoption over the past five years, fueled by the rapid growth of e-commerce, BNPL schemes and easy access to credit through EMIs, which encourage impulsive spending, especially for online purchases.
The report noted that the credit market indicator (CMI) for consumer performance improved by six points from 96 in June 2023 to 102 in June 2024, reflecting the continued improvement in overall balance-level serious delinquencies across most product categories, adding that, in contrast to all other credit products, credit cards showed a marginal increase in delinquencies, continuing the trend set over the last four quarters.
The rise in credit card debt is compounded by a harmful financial practice known as the ‘minimum due’ payment trap. Borrowers frequently make only partial payments on their credit card bills, leading to exorbitant interest rates that can climb as high as 48 per cent annually.
A recent report from Macquarie Capital indicated that many young millennials use their entire credit limit and directly default, turning into NPAs without even revolving the loan. The report stated that net credit losses for credit cards have surged to 5-6 per cent.
Recognising the growing risks in unsecured lending, the Reserve Bank of India (RBI) has stated that it is closely monitoring the situation to identify stress points. The central bank is also taking action to avert a full-blown credit default crisis.
Macquarie’s unsecured retail index reported a significant drop in credit growth to 15 per cent post-RBI measures in November 2023, with personal loans witnessing a dramatic slowdown in growth from 36 per cent in June 2023 to just 3 per cent in June 2024. However, the ballooning credit card dues are definitely a cause of concern that the RBI will be keeping a close eye on.
Experts fear that without more stringent regulations and widespread financial literacy programmes, India may be heading towards a credit crisis. The economy is shifting from a savings-driven behaviour to consumption-driven habits, making access to easy credit all the more tempting. This is particularly concerning for younger borrowers, who may lack the financial experience necessary to manage large debts effectively.
The effects of rising credit card defaults extend beyond individual consumers, posing risks to the broader financial system. Higher default rates could prompt banks to tighten lending standards, reducing access to credit for future borrowers.
Need of the hour The current landscape underscores the critical need for improved financial literacy and more responsible borrowing practices. Consumers, especially younger generations, must be educated on managing their credit effectively and avoiding deeper debt cycles.
What can be done to avoid this debt trap? First, understand that purchasing expensive items on credit while maxing out your credit limit without the ability to service it will lead to significant financial troubles, adversely affecting your creditworthiness. Do not be swayed by a colleague buying a swanky Rs1 lakh phone or someone taking an expensive holiday package, nor by the enticing advertisements promoting products or services on BNPL. Ideally, you should factor in all your monthly expenditures and determine if there is disposable income available to cover your EMIs. If there isn’t, it’s best to postpone the purchase.
One’s transition to becoming a defaulter starts with a naive, immature thought that he/she can manage the instalments. However, the reality is that credit card purchases come with steep interest rates that can reach as high as 48 per cent annually, along with several additional charges. The other crucial consequence will be that your credit rating will spiral down and you will be considered ineligible for more important advances like an
education, medical or housing loan.
LOGISTICS
Packing potential
S.M. BOOTHEM
Light commercial cargo electric vehicles (LCEV) play a major role in the last mile delivery for a variety of reasons -- economically viable, efficient, more capacity, more earnings and easy charging facilities available for e-cargo vehicles. Several manufacturers entering into the EV commercial segment to increase their market share in the lucrative market, offering a variety of features, many of them first to this segment for the comfort and convenience of the driver community.
As per Horizon Grand View Research, India’s last-mile delivery market generated a revenue of $6,243.9 million in 2023 and is expected to reach $15,051.9 million by 2030. The Indian market is expected to grow at a CAGR of 13.4 per cent from 2024 to 2030. In terms of segment, B2C was the largest revenue-generating component in 2023. C2C is the most lucrative component segment registering the fastest growth during the forecast period.
Founded in 2018, Euler Motors aims to create superior alternatives to traditional mobility solutions, driving the mass adoption of electric vehicles. The company has announced the launch of two models of Storm EV electric cargo vehicles designed for intercity and intracity usage. The Storm EV LongRange 200 (intercity) and the Storm EV T1250 (intracity) both come with a 1,250 kg payload capacity, marking the company’s foray into the 4W Light Commercial Vehicle (LCV) segment. With this, Euler Motors also introduces ADAS (Advanced Driver Assistance System) for the first time in the LCV segment in India, along with 10 other segment-first features.
The Storm EV LongRange 200 is the first vehicle in this segment designed for intercity use, offering an industry-leading RR (Real Range) of 200 km to enable cargo mobility between nearby cities -- from Delhi to Jaipur, or from Chennai to Vellore. With Storm EV, the company introduces ADAS in the LCV segment for the first time, offering NVA (Night Vision Assist) and front and reverse camera collision alert capabilities. NVA offers clear imaging of obstacles on the road even in pitch darkness -- thereby allowing drivers to safely extend their driving time to complete important deliveries. The camera alert capabilities provide greater on-road safety by alerting to potential obstacles and traffic light alerts.
Extending operations “We are excited to enter the 4W LCV segment with EV models that will maximise customer earnings every day, and also allow them to extend their operations into the intercity segment -- a sector hitherto lacking an EV product,” says Saurav Kumar, founder & CEO, Euler Motors. “Customers want to maximise earnings without paying a massive premium over ICE vehicles. Not only does Storm EV deliver price parity with its ICE counterparts -- but also beats it -- by offering capabilities and design that exceed performance, efficiency and safety benchmarks,” he adds.
The Storm EV LongRange 200 is priced at Rs12.99 lakh, while the Storm EV T1250 is priced at Rs8.99 lakh. Euler Motors also offers an industry-first extended seven-year/ 200,000 km warranty. Both models redefine standards in the commercial EV market with advanced technology, robust performance, and design, providing a versatile solution for heavy-load, intra-, and inter-city transport while achieving price parity with comparable ICE contenders.
The other players in the segment include Mahindra & Mahindra, Ashok Leyland and Omega Seiki Mobility, to name a few. To follow Euler Motors, Mahindra Last Mile Mobility has launched its ZEO 4W SCV at a starting price of Rs7.52 lakh. This comes with a range of up to 160 km. With 60 minutes fast charging gives 100 km range. The ZEO also offers a variety of technology-oriented features including ADAS.
The last-mile delivery market has tremendous potential and is expected to grow in the coming years. The electric light commercial vehicle segment in particular is in demand from the customers. The manufacturers also working on increasing the range of kilometres and ease of charging facilities in the city and intra-city for the benefit of customers to grow their business.