LIVING ON EMI: HOW EASY CREDIT IS CHANGING SAVING AND INVESTMENT BEHAVIOR

Abstract

The fast-paced consumer credit infrastructure development in India - comprising equated monthly installment (EMI) plans, Buy Now Pay Later (BNPL) sites, credit cards, and online lending apps - has, in essence, transformed financial decision-making landscape of urban and semi-urban consumers. Nearly free credit has liberalized the availability of goods and services, yet has also created anxiety as to its consequence in the long-term on household savings and investment habits. The thesis explores Living on EMI: How Easy Credit is Changing Saving and Investment Behavior seeking to explore in dual methodology namely secondary data analysis of the topic supplemented with primary field survey analysis. The main survey included 420 respondents in the major big cities in India in the form of structured questionnaire. The research uses descriptive statistics, frequency analysis, cross-tabulation, Chi-square tests, independent t-tests, correlation analysis, as well as OLS regression and proves three main hypotheses. The research results indicate that: (i) the EMI burden has a significant and positive relationship with the decreased savings regularity; (ii) increased EMI commitments are related to the existence of significant postponed investment decisions especially SIP and mutual fund contributions; and (iii) the concurrent EMI obligations are also linked with a significant financial stress level. The behaviorally most important reference is the size of the monthly installments available to consumers in purchase avoidance and not the overall cost of repayment - a cognitive pattern found on present bias and mental accounting concepts of behavioral finance. The research adds India-specific empirical evidence in the behavioral and financial impact of easy credit proliferation with practical suggestions to households, financial institutions and policymakers.