HYDERABAD: Although the incidence of borrowing in each household is high in Telangana, there are many who choose not to procure one despite needing a loan. The most frequent reason for this being there are “too many formalities”, says a study.
The report titled ‘All India Rural Financial Inclusion Survey, 2016-2017’ by the National Bank for Agricultural and Rural Development (NABARD) found that at least 38 per cent of the households cited that complexity and myriad formalities related to procuring a loan discouraged the loan seekers.
However, at least 39 per cent of those surveyed, said that they did not opt for a loan despite needing one because they had ‘no collateral security’, the safeguards in the absence of which banks are not allowed to give out loans.
The other major reason that people cited for not procuring loans or not wanting to, is simply because they ‘did not know where to apply’. “About 30% reflect lack of knowledge about the place where they can apply to get loans,” the study said.
The factor of ‘lack of knowledge’ is seen in another finding of the study which said that only 11.3 per cent people were assessed as having good financial literacy. Further, while 33 per cent had educational qualification between Class VI - X, 31 per cent were illiterate.
Another reason for not procuring a loan, cited by 27.1 per cent of the respondents, was the high rate of interest that local money lenders charged. In erstwhile (united) Andhra Pradesh for instance, there are reports claiming that middlemen and money lenders were charging as high as 225 per cent interest, per annum.
The last two reasons cited by at least 26 per cent of the total respondents was that their occupation was not stable enough to generate consistent inflows or they were already repaying an old loan for more than three years of procuring it.