Household Debt in India: RBI FSR 2024 Concerns
Why in the news
The RBI’s Financial Stability Report 2024 voiced concern over growing household debt and consumption loans, though India’s ratio is still low against most emerging economies.
Key facts
| Indicator | Figure |
|---|---|
| Debt to GDP, June 2021 | 36.6% |
| Debt to GDP, June 2024 | 42.9% |
| Household assets to GDP, 2021 | 110.4% |
| Household assets to GDP, 2024 | 108.3% |
| Prime borrowers’ asset-linked loans | 64% |
| Sub-prime loans for consumption | Almost half |
Is borrowing healthier?
- Debt growth comes from more borrowers, not heavier debt per borrower.
- Sub-prime borrowing has fallen; two-thirds of borrowers are prime or super-prime.
- RBI credit curbs since September 2023 tightened sub-prime lending.
- Yet personal loan and credit card delinquencies rose in September 2024.
Concerns
- Low-income households (under ₹5 lakh a year) lean on credit cards and unsecured loans; richer ones borrow for homes.
- A default on a small loan can set off defaults on larger ones.
- Causes: post-pandemic income insecurity and easier credit access.
- Heavy debt cuts consumption and growth, and may blunt tax cuts.
Way forward
- Tighten credit regulation.
- Encourage asset-based borrowing.
- Expand financial literacy.
Exam angle
- Report: Financial Stability Report (FSR) 2024, RBI.
- Key idea: borrowing for consumption rather than asset creation.