The poor's recourse isn't a bank, but moneylenders, mostly
Piramal Enterprises
, indicating several initiatives to promote
financial inclusion
are yet to alter the borrowing landscape for the most vulnerable.
NBFCs can help bridge the gap and step up the share in formal financing for the marginalized, said Debopam Chaudhuri, chief economist, Piramal Enterprises. Of course, they need some regulatory support, such as the ability to raise fixed deposits and have a liquidity backstop window, he said. The report shows micro-business owners and economically weaker segments (EWS and LIG) remain underserved. "These segments of Bharat continue to depend heavily on informal channels, with banking and fintech innovations yet to significantly make a meaningful impact on their access to formal credit," Chaudhuri stated.
The economic aftermath of the Covid-19 pandemic triggered major shifts in borrowing behaviour. Reverse migration increased informal and agricultural employment in lower-income states, further boosting dependence on informal credit. "Over 55% of daily-wage households reported active informal loans, even as formal lenders became more cautious due to rising credit risk," Chaudhuri said.
The report also reveals stark state-level disparities. While Kerala, Tamil Nadu, and Karnataka show strong formal credit presence-driven by gold loans and fintech usage-Bihar, Jharkhand, and West Bengal have more than 57% of households relying on informal borrowing. Notably, Punjab has transitioned from a 'high-income, low-borrowing' profile in FY19 to 'high borrowing low income states' implying increasing reliance on informal credit due to lower penetration of financial inclusion.
In 2021, borrowing from non-institutional sources was 2.63 times that of borrowing from institutional sources in India, compared to 0.6 times in Brazil and 0.27 times in the USA. "This implies that for every two people borrowing from institutional sources, five people were opting for non-institutional sources of borrowing," Chaudhuri said.
More than 55% of households associated with this profession have active loans, largely from non-institutional sources, highlighting both the demand for loans and the lack of supply from institutional sources, Chaudhuri said in his report titled Prevalence Of
Non-Institutional Borrowing
Among Indian Households: A Pre and Post Covid-19 Analysis.
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