A recent report by Bank Bazaar revealed that there’s a rise in indebtedness among Indian households. Based on a survey of 1,529 working professionals, data shows that increasing expenses and slow income growth are pushing many Indians to increasingly rely on loans to meet their financial needs.
The report highlights credit disparities: 56% of metro and 59% of non-metro residents took loans last year. Only 14% of metro and 12% of non-metro individuals remain debt-free. Non-metro areas face income stagnation, while high living costs burden metro residents, sustaining credit reliance.
The main reason behind the increase in loans is driven by the shifting aspirations of Indians mainly on factors like Wealth, Health, Relationships, Fame, and Personal Growth.
Borrowing priorities of loans differ based on geography. In the eastern parts of India, loans are taken for education mainly. In the south, auto loans for two to four-wheelers rank up at the top of the list. The north and west regions take loans for homeownership and holiday expenditures.
A key driver of growing indebtedness is the widening gap between expenses and income growth. In addition to this, people have also cited the rising cost of essentials like food and groceries as pressure points on their household budget.
Small-ticket loans are prevalent, even as the RBI works to curb credit growth. The share of debt-free individuals dropped from 19% in 2022 to 13.4% in 2024, highlighting rising loan dependency. However, many still aim to become debt-free, reflecting a conscious effort to manage debt better.
