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India's household debt rose to 45.5% of the country's gross domestic product (GDP) as of March 2026, driven primarily by growth in non-housing retail loans, according to the Reserve Bank of India's (RBI) latest Financial Stability Report (FSR). Non-housing retail loans accounted for 58.4% of total household borrowings, continuing to outpace housing, agriculture and business loans. While household leverage has increased beyond its five-year average, the RBI noted an improvement in borrower quality, with a larger share of credit held by prime-rated borrowers. The report also highlighted a shift in housing finance towards higher-value loans, while non-performing housing loans continued to decline.
India's household debt increased to 45.5% of gross domestic product (GDP) as of March 2026, largely driven by rising non-housing retail loans, according to the Reserve Bank of India's (RBI) latest Financial Stability Report (FSR). The central bank stated that although household borrowings have continued to rise, the overall credit profile of borrowers has improved, with a growing proportion of lending directed towards higher-rated customers.
The report showed that non-housing retail loans accounted for 58.4% of total household borrowings as of March 2026. Their share has increased steadily over time, consistently exceeding borrowings for housing, agriculture and business purposes. As a result, household debt has remained above its five-year average of 42.9% of GDP since September 2023.
The RBI observed that despite the increase in debt levels, the financial quality of borrowers has strengthened. The share of prime and above-rated borrowers has risen both in terms of the value of outstanding loans and the number of borrowers. According to the report, this improvement has been visible across both consumption-related and productive loans, indicating stronger credit quality within the household lending portfolio.
The central bank categorised household borrowings into three broad segments—consumption, asset creation and productive purposes. Loans taken for consumption accounted for nearly half of all household borrowings, making them the largest contributor to household debt. Consumption-related lending remained the primary driver of borrowing, followed by loans for productive purposes, while borrowings for asset creation expanded at a comparatively slower pace.
The findings come at a time when economists and market experts have repeatedly expressed concerns over rising household indebtedness. They have pointed out that an increasing share of household income is being used to service loans taken for depreciating assets such as vehicles, limiting the availability of financial resources for savings and long-term asset creation.
Among emerging market economies, India ranked fourth in terms of household debt as a share of GDP. According to the RBI, Thailand recorded the highest household debt ratio at 87.3% of GDP, followed by Malaysia at 69.9% and China at 59%.
The report also highlighted changing trends in the housing loan market. Earlier, banks' housing loan portfolios were dominated by loans of up to INR 25 lakh, which accounted for 60.6% of outstanding housing loans in March 2014, reflecting a greater emphasis on affordable housing finance.
Over the past decade, however, housing loan distribution has shifted towards higher-value lending. As of March 2026, loans with credit limits of INR 50 lakh and above accounted for 44.7% of total outstanding housing loans. Despite this change in lending patterns, the RBI noted that asset quality in the housing finance segment has continued to improve. Gross non-performing housing loans for banks declined to 0.5% in March 2026 from 1.2% in March 2019, remaining at relatively low levels despite the increase in housing credit.
Source - PTI
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