Summary of this article
Household debt reaches 45.5 per cent of GDP, RBI report shows.
Non-housing retail loans continue driving growth in household borrowings.
Borrower quality improves despite rising debt and changing loan patterns.
The overall debt of the household sector has reached 45.5 per cent of the gross domestic product (GDP) of the country. The Reserve Bank of India (RBI) has stated in its latest Financial Stability Report that an uptick in non-housing retail loans has driven this increase. These non-housing retail loans constituted around 58.4 per cent of total household borrowings as of March 2026. Their share has increased steadily over time, consistently outpacing housing loans, agriculture loans, and business loans.
Household debt as a share of the GDP has remained above its five-year average of 42.9 per cent since September 2023. Experts have been consistently flagging concerns on the increasing household debt, pointing out that an increased quantum of resources is going towards consumption expenses for servicing loans for depreciating assets like vehicles, stated the report.
Global Rankings And Credit Quality Improvement
Among emerging market economies, India stands fourth in household debt as a share of the gross domestic product. It follows Thailand at 87.3 per cent, Malaysia at 69.9 per cent, and China at 59 per cent. In terms of broad categories, loans availed for consumption purposes account for nearly half of total household borrowings. Consumption-related loans have remained the primary driver of household borrowings, followed by loans for productive purposes, whereas borrowing for asset creation has expanded at a relatively slower pace.
Overall, despite the rise in household borrowings, borrower profiles have continued to improve. There has been a significant increase observed in the share of higher-rated borrowers who are classified as prime borrowers and above, both in terms of outstanding amounts and the number of individual borrowers. This improvement is significant and evident across both consumption and productive loans, with a growing share of prime and above borrowers in total outstanding credit.
Structural Shift In Housing Loan
The central bank has noted a major shift in the housing loan portfolios of banks over time. Previously, smaller outstanding loans below the Rs 25 lakh credit limit dominated the market, which reflected an industry focus on affordable housing. These smaller loans accounted for 60.6 per cent of total housing loan outstanding as of March 2014.
In recent years, loan distribution has moved toward higher-value segments. The share of housing credit limits of Rs 50 lakh and above now accounts for 44.7 per cent of outstanding loans. Non-performing housing loans, where the borrower has missed the monthly equated instalments (EMIs) for more than 90 days, have declined to 0.5 per cent in March 2026 from 1.2 per cent in March 2019.
