Per head debt in India rises 23% in 2 years; consumption loan major driver: RBI report
The report of the Reserve Bank of India also stated that the country's household debt stood at 41.9% of the GDP at current market prices at the end of December last year, which was lower compared to that in many emerging market economies.
Kolkata: The debt per head of individual borrowers has jumped by as much as 23% in two years, the financial stability report released by the Reserve Bank of India has stated. What stood at Rs 3.9 lakh in March 2023 surged to Rs 4.8 lakh in March 2025. The report of the central bank also mentioned that borrowers who are relatively highly rated have significantly led to this surge.
Higher-rated borrowers are people (or entities) who have a robust credit profile which is marked by high credit scores. In other words, higher rated borrowers entail lower risk for the lending institution and they quickly secure loans in favorable terms.
Lower than emerging market economies
Despite this jump, the overall indebtedness of Indian households was lower than many emerging markets economies. The report said that at the end of calendar year 2024, total household debt of the country was 41.9% of its GDP (at current market prices). It is lower than other emerging market economies.
Growth of consumption loans
Retail loans that are not related to housing seem to have become a major driver. These loans (such as personal loans and vehicle loans) mainly fuel consumption purpose. These loans constituted as much as 54.9% of total household debt at the end of FY25, the report stated. Consumption loans are a double-edged sword. While at an aggregate level, they fuel growth in the economy and, in turn, often boost capex of firms and help in employment generation, injudicious handling of consumption loans (personal loans and vehicle loans) can land the borrower in a debt trap. Over the past few years, these loans have been rising faster than home loans as well as loans taken for agriculture and business.
Monitoring of debts trends crucial
"Overall, the risks to the Indian financial system from lending to households remain contained, with easing monetary policy cycle likely to reduce debt service pressures on borrowers going forward. However, the trend in household debt accumulation, especially among lower-rated borrowers, requires close monitoring,” the RBI said in its report. The report also underscored the need for trends in monitoring household debt and said it is crucial for long-term financial stability.