India’s household debt rose to 45.5% of GDP by September 2025, up from 41.3% at the end of the previous fiscal year, according to the Reserve Bank of India’s latest Financial Stability Report. The increase marks a continuation of an upward trend, with debt levels remaining above the five-year average of 42.9% since September 2023.
The surge has been primarily driven by consumption-led borrowing, particularly non-housing retail loans, which accounted for 58.4% of total household debt as of March 2026. Loans for consumption purposes now make up nearly half of all household borrowings, making them the largest contributor to the overall rise. In comparison, loans for productive purposes ranked second, while borrowing for asset creation grew at a slower pace.
The composition of household borrowing has raised concerns among analysts, who note that a growing share of debt is being used for consumption rather than wealth-building. A significant portion of these loans is linked to depreciating assets, such as vehicles, which may not contribute to long-term financial stability.
Despite the increase in debt levels, the RBI highlighted improvements in borrower quality. The share of higher-rated borrowers, classified as prime and above, has increased across both consumption and productive loan categories. This shift is reflected in both the total value of loans outstanding and the number of borrowers.
The report also pointed to changes in the housing loan segment. Loans of Rs 50 lakh and above now account for 44.7% of outstanding housing credit, indicating a shift from a market previously dominated by smaller-ticket loans below Rs 25 lakh. At the same time, asset quality in housing loans has strengthened, with non-performing assets declining to 0.5% in March 2026 from 1.2% in March 2019.
In a broader assessment of financial stability, the RBI noted that Indian banks’ asset quality remains strong. Gross non-performing assets are at multi-decade lows and are projected to stay below 2% through 2028 under a baseline scenario, according to the report cited by Reuters.
Among emerging market economies, India now ranks fourth in household debt as a share of GDP, behind Thailand, Malaysia, and China.
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