Housing loans, which form 29 per cent of household debt, have been growing steadily over the last year. Incremental data, however, shows that home loan growth is mainly driven by the existing borrowers who are availing of additional loans, and their share has increased to over a third of the housing loans sanctioned in March 2025, stated the Reserve Bank of India’s financial stability report (RBI FSR) on Monday.

“Moreover, share of borrower accounts with loan to-value (LTV) ratios greater than 70 per cent is also rising, and delinquency levels are higher for lower-rated and more leveraged borrowers. However, these have declined considerably from their levels during Covid-19,” the report said.

Overall, India’s household debt has been increasing in recent years, driven by rising borrowing from the financial sector. However, as on end-December 2024, India’s household debt at 42 per cent of GDP (at current market prices) was relatively low compared to other emerging market economies.

Individual borrowers

Among broad categories of household debt, non-housing retail loans – which are mostly used for consumption purposes – formed 55 per cent of the total household debt as of March 2025, and 26 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans, the report said.

At an aggregate level, the per capita debt of individual borrowers has grown from ₹3.9 lakh in March 2023 to ₹4.8 lakh in March 2025, driven by higher-rated borrowers. ”This is important from a debt serviceability and financial stability perspective, as it indicates that household balance sheets at an aggregate level are resilient,” stated the report.

The report added that risks to the Indian financial system from lending to households remain contained, with easing monetary policy cycle likely to reduce debt service pressures on borrowers going forward. However, the trend in household debt accumulation, especially among lower-rated borrowers, requires close monitoring.

Published on June 30, 2025