Zerodha Founder Nithin Kamath Warns About Overburdening Personal Loans

Recently on an X (formerly Twitter) post, the founder and CEO of Zerodha, Nithin Kamath, highlighted the urgency for a good credit usage strategy and its implications on your borrowings. This post is an excerpt from an article published in The Daily Brief by Zerodha, titled "India's Unsecured Loan Boom: A Risky Trend?", where the Reserve Bank of India's Financial Stability Report, published in December 2024, is further analysed to understand reasons for the steep rise in debt. 

Also Read: Outlook Money's Budget 2025 Coverage

In the X post, Kamath talks about how the post-pandemic period has seen a steep increase in personal loans and credit card borrowings. Even though credit cards have become one of the most convenient financial tools, the dark side of it is that some people have borrowed too much or borrowed even knowing that they might not be able to afford to repay. People often take loans to spend them on gadgets or other discretionary items, which could have been achieved without taking a loan, only with a little planned saving. 

In the article, two groups of borrowers are mentioned. The first group contains people with stronger credit scores, who usually take loans to buy property/home, to start or expand a business, or to invest in such assets that might grow in value over time. In the end, these people are borrowing money to create something more valuable.

On the other hand, the second group includes people with relatively weaker credit scores, who are more likely to take personal loans to meet short-term needs. Most of these short-term loans fall under Rs 10,000 and are borrowed from fintech apps. Kamath highlights, "I wonder how much of this is due to the incessant spam from these loan apps nudging people to take 'instant pre-approved' loans". 

Kamath directed to those who are in debt already and propounded prioritising paying off the outstanding amounts and debts the first thing. He reiterated, "The lowest hanging fruit and the most bang for your buck thing you can do with your personal finances is to pay off all your high-interest loans, including credit cards". He also says that the psychological effects of paying off every debt that stresses you will reflect everywhere, from your workplace to your personal life. One must also ensure getting out of every debt before starting any investment, thus making it easier to save money. 

The credit bureau CIRF or Center for Research in International Finance brought a report in January 2025 which has been cited in the article on The Daily Brief by Zerodha, highlights the urgency of the situation. As of September 2024 in India, the total outstanding amount of personal loans stood at Rs 13.7 lakh crore. The public sector banks held the largest share of about 38 per cent, followed by 33 per cent in private sector banks and NBFCs (Non-Banking Financial Companies) with a share of around 24 per cent. 

He also reposted an old post from January 31, 2021, with a caption that said, "And this has been a personal experience". The post talks about times when he borrowed money to spend it on things that he did not really need. The lesson we can draw from this post is that the first lesson of personal finance is to borrow only when you are really sure that you can earn a return more than the cost of than borrowed sum.