Understanding household debt trends: Consumption vs. Asset Building
ADVERTISEMENT From the financial stability perspective, more than 50% of loans are to the prime and above-rated borrowers. Only 22% of borrowers are from the sub-prime category where stress is building up. On the positive side though monetary easing by the central bank is expected to lower the debt servicing burden.
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. The rise in per capita debt has been mainly led by the higher-rated borrowers, it said. "Among broad categories of household debt, non-housing retail loans, which are mostly used for consumption purposes, formed 54.9% of total household debt as of March 2025 and 25.7 % of disposable income as of March 2024," noted the FSR. "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."
Housing loans, on the other hand, formed 29% of household debt and their growth has been steady. However, disaggregated data shows that existing borrowers are availing more loans rather than new borrowers coming into the borrowing-fold. Significantly, the share of borrower accounts with loan to value higher than 70% is rising. But at the same time the report noted that delinquency levels are higher for lower-rated and more leveraged borrowers. However, these have declined considerably from their levels during Covid-19, it said.The share of better-rated customers (prime and above) among total borrowers is growing, both in terms of the outstanding amount and number of borrowers.
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