The Indian economy is witnessing a significant transformation in its household borrowing pattern, with debt increasingly directed toward consumption rather than asset creation. This shift has raised concerns about financial stability and the long-term implications for borrowers, banks, and policymakers.
Key Statistics
- 23% increase in individual debt in two years, with the average debt per individual jumping to ₹4.8 lakh from ₹3.9 lakh in 2023.
- Non-housing retail loans now constitute 55% of household debt, surpassing home loans.
- Credit card spending has surged dramatically, with the number of credit cards in use growing more than fivefold and credit card spending increasing 13 times over the past 13 years.
Why the Shift?
According to personal finance expert Pranjal Kamra, the average household debt has increased significantly, and the debt is now directed towards personal spending rather than traditional investments like homes. In a recent LinkedIn post, Kamra highlighted a concerning shift in household borrowing, stating that non-housing retail loans, including credit card dues, personal loans, and auto loans, now account for 55% of total household debt, while home loans account for just 29%.
Retail Loan Growth
| Loan Type | Pre-pandemic CAGR (FY09–19) | Post-pandemic CAGR (FY19–24) |
|---|---|---|
| Credit Cards | 12.1% | 21.0% |
| Personal Loans | 15.1% | 18.2% |
| Vehicle Loans | 16.5% | 14.8% |
| Housing Loans | 19.0% | 15.5% |
Experts’ Concerns
“Our parents borrowed to build assets. Today, most people borrow to fuel instant gratification.”
Experts warn that the surge in unsecured lending could increase default risks and reduce financial stability in the long run.
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