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N.S.Vageesh

Chennai, Sept. 16 Catch them young, they say. Whether it is a reader of this paper, or a cricketer for the national team or a consumer, the marketing mantra is to focus on youth.

Of course, it helps that India has the famed “demographic dividend” — a young nation with a bulk of its population below the age of 25 — all future earners, savers, borrowers and spenders. A prospect to make bankers drool.

Surprise! Not all of them are happy with their experience with the young borrower (age 20 to 25 years). Bankers say this group is both aspirational and unruly.

“Youngsters who are just into the job market want a car, television, fridge, an air-conditioner, a washing machine and a house — everything that took their parents a few decades or a lifetime of earning to get. And oh yes, they change their mobiles every four to six months. Consumption patterns are changing,” says Mr Harpreet Singh, Head-Branch Banking & Wealth Management Services, Centurion Bank of Punjab.

Nothing wrong with the aspirations themselves, it is just that most of this is funded with loans from banks, which have to be repaid. That’s a small detail that many (although not all) youngsters forget. Many of them, especially those employed in the BPO/IT sectors disappear after taking a loan — shifting jobs and residences, and, of course, changing their mobile numbers too. It proves a costly exercise to go after them.

Is this something that’s happening across the country? Mr S. Santhanakrishnan, Chairman, Credit Information Bureau of India (CIBIL), which compiles data on all borrowers in the country, cautions that it would not be fair to generalise that everyone in this segment is a bad risk.

While conceding that some borrowers in this age group do find themselves over-leveraged, he says, the onus is on banks to give credit to this segment in smaller doses and see if they have credit discipline.

Mr Santhanakrishnan says banks have to observe all due diligence practices like having joint borrowers, guarantors, margins, check-off facility with the employers etc. He says that in his experience, those in the age group of 20-25 are the second biggest group of borrowers, right behind those in the 25-30 years group.

Mr Singh readily endorses a suggestion to increase the minimum age for borrowing! In fact, he says, Centurion Bank has decided not to lend to borrowers below the age of 25.

Most engineering graduates would be through with education by age 21 and be on to a plum software job in that period. Won’t Centurion Bank be missing out on a good growth opportunity? Mr Singh shakes his head and answers firmly, “We have decided to stay clear of this segment.”

What happens after that? He says: “There is a significant change in borrower behaviour after the age of 26-27. The borrower, at that age, figures out what he wants to do in life. He is mostly thinking of settling down and getting married.” Half in jest, Mr Singh says, “Before this, he probably had four or five girlfriends and that added to his expenses.”

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