This story is from February 5, 2009

Young borrowers go for debt counselling

Rucha Biju Chitrodia / TNN / Feb 5, 2009, 00:23 IST

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An increasing number of young borrowers is walking into debt counselling centres. Many of them had borrowed heavily to invest in the markets during the boom.

Atul, 28, borrowed more than Rs 25 lakh to invest in the commodities market. He lost the entire amount.
Raghunath, a young banker, took loans totalling Rs 18 lakh to trade in shares. His investments came crashing down when the market plunged.
Abhijeet, just 23, had a good job in an IT company. He went overboard, taking loans of Rs 10 lakh to finance stock purchases.Now he has lost his job in the economic slowdown.
It��s a sign of the times that an increasing number of young borrowers is walking into debt counselling centres. Many of them had borrowed heavily to invest in the markets during the boom. Their predicament owes as much to the sudden economic slump as to a poor understanding of the workings of new-age credit options. Now they��re grappling with huge debt, which debt counsellors say is the result of trying to repay one loan with another.

Debt counselling initiatives, which are commonplace in the developed world but relatively new in this country, advise borrowers and offer credit restructuring assistance to those caught in a debt trap. The services are free, and cover diverse categories of debt, such as credit cards, personal loans and home loans.
Says Nutan Lugani of Disha Financial Counselling in Delhi, ��Many youngsters are excessively leveraged. The younger set lives life well, but does not believe in saving. If they lose their job, or if the market crashes, they have nothing to fall back on.��

Until a year ago, the clientele of debt counsellors consisted largely of middle-aged people who found themselves in a spot because they had made unfortunate career decisions or who were unable to repay money borrowed for medical expenses or for a child��s marriage or education. The size of debt was lower too.
Today, debts are more substantial. ��We get people with very high levels of default. Earlier, they would come to us with debts of Rs 10-15 lakh. Now some cases go up to Rs 25 lakh or even 50 lakh,�� says V N Kulkarni, chief counsellor at Abhay Credit Counselling Centre in Mumbai.
Mumbai has two debt counselling centres. One is Abhay Credit Counselling, an initiative of the Bank of India, and the other is Disha, an ICICI Bank venture. Both are creditor-neutral, that is, their services can be used by anyone, not just those who have loans from the Bank of India or ICICI Bank. Besides Mumbai, Abhay has centres in Chennai, Wardha, and Gumla in Jharkhand. Disha has centres in Ahmedabad, Chennai, Delhi, Hyderabad, Kanpur, Kolkata and Ludhiana.
Kulkarni says that until recently, the Mumbai centre got about three people a day, but that number has doubled now. Centre staff attribute the increase in part to rising awareness about such initiatives.

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