India’s household debt has significantly increased, reaching approximately ₹4.8 lakh per individual by March 2025, which is a 23% rise from ₹3.9 lakh in 2023 according to the Reserve Bank of India (RBI)’s June 2025 Financial Stability Report. This debt is increasingly directed towards consumption rather than asset creation, raising concerns about financial stability.
This rise is attributed to increased access to loans and a growing trend of non-housing retail loans for consumption. While this shows improved access to credit, it also signifies a growing debt burden for individuals, with concerns about financial stability and the shift from investment to consumption-driven borrowing.
Overview Of Household Debt In India (2025)
India’s household debt has seen significant growth, reaching approximately ₹120 trillion by March 2024. This represents about 42.9% of the country’s GDP, a notable increase from 36.6% in 2021. The average per capita debt has risen from ₹3.9 lakh in 2023 to ₹4.8 lakh in 2025.
Some key aspects of this situation are as follows:
(a) Shift Towards Consumption: A significant concern is the increasing use of debt to fund daily expenses and lifestyle needs rather than for creating long-term assets like homes. For many middle-income households, borrowing is used to bridge the gap between their income and their consumption, which is putting pressure on household budgets. Many young borrowers are using credit for immediate gratification.
(b) Increased Unsecured Lending: The rising share of personal loans and credit card debt has been a focus of the RBI. In 2024, the RBI increased risk weights on unsecured personal loans to slow credit growth, but this was later adjusted in 2025 to stimulate the economy. Credit card debt has surged, with defaults increasing to 1.8% in mid-2024. The average credit card balance rose to ₹32,233, indicating higher reliance on credit.
(c) Decline In Savings: Household net financial savings have decreased, hitting a near 50-year low of 5.3% of GDP in FY23 before recovering slightly. This decline is linked to both increased borrowing and stagnant income growth relative to rising expenses.
(d) Rural-Urban Credit Scenario: Urban borrowers, with greater access to digital lending platforms, are more actively pursuing unsecured loans, while rural borrowers remain more reliant on informal or agricultural credit. This is a blessing in disguise for rural people as they would be saved from debt trap.
(e) Monitoring By Regulators: The RBI continues to monitor household debt trends, particularly among lower-rated and more leveraged borrowers, to ensure long-term financial stability. Delinquency levels are higher among these groups, though they have decreased from pandemic levels.
(f) Gambling Addiction: Indians have been severely addicted to online gambling and stock market gambling. This has happened as Modi govt actively promoted online gambling and unregulated and unreasonable investment in stock market of India. Indians have been indebted due to these two money sucking black holes of India.
(g) Financial Stability Risks: Experts warn that the increase in unsecured lending could lead to higher default risks, potentially straining household finances and overall economic stability. The increasing reliance on debt for consumption-related spending raises concerns about loan-to-value ratios and overall household financial stability.
(h) Debt-To-GDP Ratio: Household debt stood at 41.9% of GDP as of December 2024, down slightly from a high of 42.9% in June 2024. This remains higher than the 40% recorded in December 2023. As of March 2025, India’s household debt-to-GDP ratio was 48.6%, a significant and alarming increase from the 41.9% recorded in December 2024.
(i) Average Debt Per Individual: The average debt per individual borrower rose significantly by 23% in two years, from ₹3.9 lakh in March 2023 to ₹4.8 lakh in March 2025.
(j) Non-Housing Retail Loans: This category, which includes personal loans, credit card debt, and auto loans, is the largest driver of debt growth. It accounted for nearly 55% of total household debt in March 2025. This figure contrasts sharply with home loans, which comprised only 29% of household debt in the same period.
(k) Borrower Profile: The increase in debt is primarily concentrated among higher-rated (“Prime and Above”) borrowers, though debt among lower-rated borrowers is a monitoring concern for the RBI.
While India’s household debt levels are rising, they remain manageable compared to global standards. However, the shift towards consumption-based borrowing raises concerns about long-term financial health and stability.