MUMBAI: Household debt came down from 42.9% of the gross domestic product (GDP) in June 2024 to 41.9% (current market prices) in December 2024, the Financial Stability Report showed on Monday. However, it is still up compared with December 2023, when it stood at 40%. In June 2021, the same was 36.6%.
The Reserve Bank of India (RBI) said India’s household debt was lower than that of emerging market economies, which stood at 46.6% of the GDP.
Non-housing retail loans, mostly used for consumption purposes, formed 54.9% of the total household debt as of March 2025. The share of these loans has been consistently growing over the years, and their growth has outpaced that of housing, agriculture and business loans, said the report.
Considering the trend in household debt, the lower-rated borrowers require close monitoring, the RBI said. Though delinquencies declined from the pandemic period, it is still higher for lower-rated and more leveraged borrowers.
“Going ahead, I expect the household debt-to-GDP to stabilise or the pace to soften because of the slowdown in urban consumption and demand,” said Gaura Sengupta, chief economist, IDFC First Bank.
However, the share of better-rated borrowers is increasing in terms of outstanding amounts, indicating a resilient household at an aggregate level.
“Overall, the risks to the Indian financial system from lending to households remain contained, with an easing monetary policy cycle likely to reduce debt service pressures on borrowers going forward,” RBI said.
The gross-non performing asset ratio (GNPA) of housing loan was 3.3% as of March, while GNPA for housing loans to sub-prime borrowers stood at 10.1%.
Housing loans, which have been steady, formed 29% of the household debt. These loans are mostly availed of by existing borrowers, and its share has been increasing to more than a third of the housing loans sanctioned in March.
Household wealth, on the other hand, grew sharply in FY24, where deposits, insurance and pension funds comprised 70% of the wealth.
Source: The Financial Express
