India's middle class struggles with personal debt burden
India's recent binge on credit cards and personal loans has ended badly for some - but there are ways to fight back against debt.
Mr Sayed remembers his lowest point in late 2008. The father of two in Mumbai was guarding a dark secret from neighbours, friends and even his wife.
After several years of signing up to all the credit cards and personal loans he could find, he had notched up Rs 3,000,000 ($66,000) in debt.
Across Asia millions of newly middle class families are making personal finance decisions for the first time. We look at the big issues facing them.
He bottled up his growing sense of shame. "I thought better you run away from Mumbai, or you commit suicide," he remembers.
Until recently, the Indian middle class were deeply conservative borrowers. With a strong cultural aversion to loans and with very little finance on the market, most people lived frugally all their lives.
But in the years before the global economic crunch, credit cards and loans flooded onto the markets of most Asian countries.
The amount of outstanding credit card debt in India tripled between 2004 and 2007, according to industry reports. Private and foreign banks marketed credit cards and loans to consumers who had little experience of borrowing.
"Getting credit cards in India two or three years back was very easy," recounts Mr Sayed. "They would fill out the forms for you." He got six cards and nine unsecured loans, with few questions asked.
His business was failing, so he started using the credit cards to withdraw cash, which he spent on everything from paying his staff to feeding his children.Debt trap
Mr Sayed didn't realise that with most credit cards, high interest charges kick in immediately when you withdraw from ATMs. His feelings of shame prevented him from seeking help.
He is not the only one. Although 'delinquency' rates on credit cards are relatively low across Asia, China's central bank warned last November that bad credit card debt was on the rise.
But there are in fact a few easy steps to fight back against debt.
End Quote VN Kulkarni Abhay Debt Counselling Centre, Mumbai
If the loan agents are doing something wrong, tell the person and the bank they are violating the code of conduct.”
"People who have debts have not realised one thing: that it's possible to come out of the debt," says VN Kulkarni, of the Abhay Debt Counselling Centre in Mumbai. "You will be okay."
The Abhay centre is above a branch of the State Bank of India in a Mumbai suburb. It's one of a growing number of debt counselling services in India, many of which are free to use.
The counsellors in Mumbai helped Mr Sayed to turn his life around. "They told him he would be okay," recalls Kulkarni. "These simple words provided so much relief."
The road to recovery starts with a very simple step: share your problems.
"Please discuss with your family," advises Mr Kulkarni. It's hard at first, but he says that people's families almost always come to the aid of a person in debt - by getting together to move to a cheaper house, reducing expenses or taking on extra work.
After he explained the situation to her, Mr Sayed's wife helped by tutoring students to bring in extra cash.
Dealing with shame and guilt is step one. But there are a number of practical steps you can take next.Repayment schedule
A good first option is to write to the banks you owe money to, and ask them to adjust your repayment schedule, says Kulkarni.
Most of the time they will listen, he says. In many countries, the banks can check you are telling the truth using credit bureaus - like CIBIL in India.
"Bring out all the facts. Say yes, I've taken out lots of cards and cannot pay for these reasons," he advises.
It's then a good idea to try and swap your most expensive debt - like credit cards - for cheaper options.
"If you have property, mortgage it," advises Kulkarni. "Swap high cost debt for low cost debt."
Securing your debt against your home carries an added risk because you could lose your property if you fail to repay.
But it comes with much lower interest rates, which helps reduce the amount you have to pay.Code of conduct
Another step is to deal with the recovery agents who may be visiting your home, rather than ignoring them. If they misbehave there are steps you can take, says Mr Kulkarni.
Personal finance in India
- Habitations with a commerical bank branch: approx. 5%
- Indians with bank accounts: 40%
- Debit card penetration: approx. 13%
- Credit card penetration: approx. 2%
"A code of conduct for bankers has come out in India," he says. "You will find it on each and every website of banks in India."
"Go through this code," he advises. "If the loan agents are doing something wrong, tell the person and the bank they are violating the code of conduct."
He says the code sets out the kinds of behaviour that is acceptable for recovery agents - for example that they cannot visit late at night or when there is a death in the family.
If all else fails, you can take it up with the regulator - the Reserve Bank of India. Last year, 24% of complaints dealt with by India's new Banking Ombudsman complaints service were about credit card debt.
After counselling, Mr Sayed and his family have worked together to reduce his debt - and in just 18 months he has cleared three quarters of it.
Mr Kulkarni says the best advice of all is to borrow wisely and using the right products in the first place. Credit cards are useful for some purposes but they are often the most expensive debt of all, he advises.
In India, at least in the past few years, consumers seem to be listening. The latest figures show home loans are bouncing back and loans for new cars are on the rise, but the number of new credit cards is still significantly down.
The opinions expressed are those of the contributors and not held by the BBC. The material is for general information only and does not constitute investment, tax, legal or any other form of advice. You should not rely on this information to make any investment decisions. Always obtain independent, professional advice for your own particular situation.