India’s household debt rises above 41% of GDP, but resilience remains intact, shows RBI FSR

Reserve Bank of India

• India's household debt rose to 41.3 percent of GDP by March 2025
• Non-housing retail loans made up 55.3 percent of household borrowings
• Net household financial savings improved to 7.6 percent of GDP in Q4 2024–25

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India’s household debt climbed to 41.3 percent of GDP as of end-March 2025, marking a sustained increase over its five-year average of 38.3 percent. While the rise reflects stronger borrowing by households, the overall level of debt remains lower than that of most peer emerging market economies, Reserve Bank of India’s (RBI) Financial Stability Report said.

The composition of household borrowing continues to tilt towards consumption. Non-housing retail loans, largely taken for consumption purposes, accounted for 55.3 percent of total household borrowings from financial institutions as of September 2025. Their share has steadily increased over the years, with growth consistently outpacing housing loans as well as agriculture and business loans.

From a risk perspective, the quality of household credit has improved. The share of better-rated borrowers, classified as prime and above, has increased both in terms of outstanding loan amounts and number of borrowers.

A decomposition of household borrowings shows that loans for consumption dominate, followed by those for asset creation and productive purposes. Importantly, the growth rate of these loans has moderated in recent months. At the same time, the risk profile of borrowers availing loans for both consumption and productive activities has improved, with an increasing share of prime and above borrowers in outstanding loans, report said.

Personal loans formed 22.3 percent of consumption-purpose loans as of end-September 2025. The risk-tier migration matrix for personal loans reveals greater stability in borrower profiles during September 2024-2025 compared to the previous year. Near-prime and prime borrowers recorded higher upgrades, while prime-plus and super-prime borrowers saw a relatively higher share of downgrades.

On the savings front, net household financial savings improved to 7.6 percent of GDP in Q4 of 2024–25, supported by a rise in financial assets and stabilisation of liabilities. The stock of gross financial assets remained steady at above 100 percent of GDP. However, growth in household financial wealth moderated, reflecting a correction in equity markets and investment funds.

In terms of asset allocation, deposits along with insurance and pension funds continued to dominate household financial wealth, accounting for nearly 69.2 percent as of end-March 2025. While the share of equities and investment funds edged up marginally, overall participation in the securities market remains limited.

According to the latest SEBI survey, household penetration in securities market products stood at just 9.5 percent of total households, largely concentrated in urban centres. Within the securities market, equity remains the preferred asset class for households.