In the first half of FY26, 55.3% of household borrowings were non-housing retail loans, mostly for consumption. According to Reserve Bank of India (RBI) figures, 28.6% of loans were for housing, while 16.1% were for business and agricultural.
Rising Share of Retail Consumer Loans
According to the RBI’s Financial Stability Report for December 2025, the sector of retail consumer loans has steadily increased since March 2019, exceeding the proportions of business, housing, and agricultural loans.
Concerningly, the increased percentage of personal loans coincides with an increase in Indian families’ total debt levels, which exceeded their five-year average to reach 41.3% of GDP in the most recent fiscal year.
Household Debt Levels and Global Comparison
According to the study, “the household-level indebtedness exhibited a ‘continuous rise compared to its 5-year average of 38.3%,'” although it is still lower “relative to most” peer emerging market economies (EMEs).
India’s household debt was greater than that of South Africa and Brazil, where it was between 33.8% and 36.6% of GDP, but lower than that of Chile, China, Malaysia, and Thailand, where it varied from 45.1% to 88% of GDP.
Economic Growth Context
Due mostly to robust domestic demand, India’s real GDP increased by 8.2% in Q2 FY26 compared to 7.8% in the previous quarter and 7.4% in Q4 of FY25.
Composition of Personal Loans
According to RBI statistics, personal loans accounted for 22.3% of all loans, with loans taken out for consumption making up the majority. Loans made for the creation of assets, such home loans, came next, and then loans obtained for productive uses.
The growth in the proportion of better-rated consumers, both in terms of outstanding amounts and the number of borrowers, contributed to the jump.
Borrower Risk Profile Improvement
According to the RBI, this suggests that the household sector’s overall resilience is still “strong.”
According to the report, “the risk profile of borrowers obtaining loans for consumption and productive purposes has exhibited improvement, with the percentage of prime and above borrowers in outstanding loans indicating an upward trend.”
Prime vs Subprime Borrowers
As of September 2025, 56.2% of all household loans in terms of volume and 70.4% in terms of loan value fell into the category of “prime and above rated” borrowers, according to the study.
Conversely, 23% of all loans were made to “subprime” customers, although only 10.2% of loans were taken out.
Household Savings and Wealth Trends
In Q4 of FY25, net household financial savings also increased to 7.6% of GDP.
According to the RBI, this resulted from an increase in financial assets and a stabilization of liabilities, while the stock of gross financial assets was stable over 100% of GDP.
Wealth Composition
However, due to a downturn in stock and investment funds, family wealth growth slowed.
As of the end of March 2025, savings, insurance, and pension funds made up 69.2% of household financial wealth, notwithstanding a slight rise in the proportion of stocks and investment funds.
Securities Market Participation
According to the research, which cited a Securities and Exchange Board of India (Sebi) survey, overall household penetration remained at 9.5% of the 337.2 million total households, mostly from metropolitan areas, despite rising knowledge of securities market products.
However, equities continues to be the most popular asset type for families in the securities market.
Thus, financialization of savings and long-term capital building may be aided by diversifying household savings to asset classes other than stocks and bank deposits, it said.
