More salaried than self-employed Indians earning less than Rs 25k a month face borrower stress—study

The Print

6 hours ago

The Think360.ai study analysed 20,000 borrowers for over a year to determine their credit scores, using AI, machine learning, and data science techniques on the Algo360 platform.
With both data science and Artificial Intelligence, Think360.ai is a firm that helps banks and financial institutions make credit decisions. It is a subsidiary of Computer Age Management Services (CAMS) that works as a mutual fund transfer agency.
New Delhi: Over 70 percent of the self-employed earning less than Rs 25,000 a month in India are witnessing acute financial strain in servicing the multiple small loans they have been taking, according to a study conducted by Think360.ai .
The study has revealed that though both the salaried and the self-employed—earning less than Rs 25,000/month—faced financial strain, the share of the salaried missing to pay at least one of the equated monthly instalments (EMI) on loans was 76 percent, a higher share than the 64 percent of the self-employed who missed at least one EMI payment.
ThePrint contacted Mr. Amit Das, the Think360.ai CEO, who said, 'Credit stress across India is uneven: low-income borrowers, often managing multiple small loans, driven by multiple life priorities, face the highest risks and defaults, whereas those earning steadily above Rs 25,000 a month enjoy steadier finances and lower defaults.'
Das further said, 'Smaller towns and semi-urban areas in Bharat have lower financial literacy and higher reliance on informal lenders, whereas large city centres have easier and broader access to formal credit.'
The study cited a macroeconomic headwind, which can be due to ongoing global conflicts and prevailing uncertainties over tariffs, most impacts those servicing multiple loans at low income or salary levels.
'On average, salaried borrowers hold three active loan accounts, while self-employed individuals manage four, with a higher tilt towards informal and collateralised credit products,' the study has explained.
Perfios and PWC India published a report, How India Spends: A Deep Dive into Consumer Spending Behaviour, earlier this year, showing that salaried individuals across city tiers allocate over a third of their monthly income towards EMI. This finding reflects a high level of reliance on loans by salaried individuals—a trend that increases the risk for lenders.
The study has recommended moving beyond the traditional credit scores, which, in underserved segments, can not determine the financial situation, for the timely assessment of the risks. It also emphasised a behaviour-driven underwriting framework to give more inclusive and accurate credit assessments for individuals whose incomes are irregular and fall outside the formal credit systems.
Using and analysing alternative data, including spending patterns, transaction volume, and repayment trends, can help to create more accurate borrower profiles, which are open to risk-based segmentation, the study has asserted.
According to Das, 'lenders, especially, tech-driven lenders, are responding with enhanced credit assessment, nuanced risk-based pricing, continuous risk monitoring, financial education, flexible repayment options, and alternative data partnerships, thereby building a more resilient and inclusive financial ecosystem'.
(Edited by Madhurita Goswami)
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