The survey showed the coronavirus pandemic has disrupted incomes across age brackets, from the young first-time salary earner to senior and experienced professionals who are not far away from the retirement age.
The spread of Coronavirus has impacted both the salaried and the self-employed people. In fact, close to 1.9 crore salaried jobs were lost in India from April to July this year. However, the Covid-19 pandemic has been particularly hard for India’s self-employed class, drying up cash inflows and thereby, threatening the future of their businesses, according to Paisabazaar’s latest consumer survey.
As many as 86% of the self-employed people surveyed have reported loss in income as against 56% salaried. As per the report titled ‘Dealing with debt’ – which aims to understand the impact of Covid-19 on consumers’ income and repayment capacity along with the strong trends emerging that may shape the way for consumers and the lending industry – 86% of the self-employed customers said the pandemic has adversely impacted their income, while 25% claimed that their income has come down to zero. Interestingly, the 14% of self-employed consumers who said their income has not been negatively impacted, a majority of them (over 90%) were self-employed professionals like Doctors and Lawyers who had their own practice.
On the other hand, salaried customers though highly affected, are impacted less than the self-employed. While 44% of the salaried respondents claimed their salary has not been negatively affected, another 30% said their salary has been reduced by more than half from the pre-Covid levels, while 12% salaried people reported complete loss of salary due to job loss.
Impact Split by Geography
In terms of impact, split by Geography, the survey showed Chennai is the least impacted city by the Coronavirus pandemic in terms of loss of income. Over 48% of consumers, who participated in the survey from Chennai, said they did not suffer any negative impact due to the health crisis and the resultant restrictions imposed. And only 9% of Chennai residents who participated in the survey suffered a 100% income loss.
Delhi and the NCR cities were the most impacted cities with 70% of their resident participants reporting a negative impact on income. Among these, 16% of people from the NCR also said their income has come down to zero due to the pandemic-related disruptions. However, in terms of percentage of customers who had a complete loss of income, Mumbai was the worst placed with 26% Mumbaikars reporting income plummeting to nil. Also, Mumbai had the highest percentage of moratorium takers, as 65% of customers from Mumbai who participated in the survey took a moratorium.
With the moratorium now over, when asked about their capacity to repay their EMIs, 66% of respondents from Chennai said they would be able to afford their monthly debt obligation in full. Mumbai was the worst placed, with Delhi and Bangalore only marginally better. 52% of Mumbai respondents cannot pay their EMIs in full, with 15% of them saying they currently have zero payment capacity.
Older Borrowers More Financially Stable
The survey showed the coronavirus pandemic has disrupted incomes across age brackets, from the young first-time salary earner to senior and experienced professionals who are not far away from the retirement age. While the income impact was largely uniform across all age-groups, both among salaried and self-employed customers, data from the survey showed that there were lesser takers for the moratorium among those who are over 50 years of age (48% Vs Over 55% for every other younger age groups).
A more financially stable life could be the primary reason behind a large section of older customers not choosing to take the moratorium.
However, when looked at the debt obligation for these older customers who are over 50 years of age, more than 50% of them have EMIs of more than Rs 25,000 to repay. In fact, around 11% of them have a monthly obligation of above Rs 1 lakh.
In comparison, among those who are 30 years or less, only 36% of them have EMI obligation of over Rs 25,000. For those in their 30s and 40s, 43% have EMIs of Rs 25,000 and above to pay each month.
EMI obligation across age groups
Interestingly, despite widespread job loss and adverse impact on income, people above 50 years of age also reported the highest repayment capacity with 63% of them saying they can meet their EMI obligation every month with no need for any relief from their lender. Only 6% of those above 50 said they do not have any repayment capacity due to the income loss, compared to 10%-13% in younger age groups.
Reasons for Availing the Moratorium
One of the key findings of the survey was that while 53% of the salaried professionals availed the moratorium, over one-third (34%) of them did not suffer any impact on their salaries. A primary reason was fear of losing their job or a significant cut in salaries, and as a result, many decided to save more for an uncertain future, by taking the moratorium.
However, this was in contrast with self-employed customers whose need to take the moratorium was more immediate. 68% of those who run their businesses took the moratorium. Of these, almost 98% of them had a negative impact on their income since the Coronavirus outbreak this year.
Who Can Afford Their EMIs
Though 44% of the people surveyed had not taken the moratorium, but a much larger number – 55% – said they can afford to pay their loan EMIs and Credit Card bills each month hereon. In fact, of the people, who had opted for the moratorium, 40% of them say they now have the repayment capacity to meet their monthly EMI obligations in full.
However, there were still 9% people who said they currently do not have any repayment capacity to service their monthly debt obligation.
Borrowers Keen To Apply For Loan Restructuring
55% of the borrowers responded that they would approach their lenders to restructure their loan in some form to provide relief. Though this includes many whose income has not been affected due to the coronavirus pandemic and hence, their lenders may not find them eligible for a loan recast plan. Within those who have already availed the moratorium, 70% of them said they would like their lenders to provide them some form of relief in their loan repayment.