According to the RBI report, the Indian household debt is rising, but it is relatively low in comparison with other emerging markets

The Growing Story of Indian Household Debt: A Closer Look

The Reserve Bank of India (RBI) has highlighted that while household debt in India has been on the rise over the past three years, it remains relatively low compared to other emerging market economies (EMEs

The Big Picture Indian families are borrowing more money than they did three years ago. However, when we compare this to other similar countries, Indians actually borrow less. As of June 2024, Indian households’ total borrowing is about 43% of what the entire country produces (GDP). This is considered relatively low.

Who’s Borrowing and Why? When we look at who’s borrowing money, it’s mostly individuals rather than entire families. In fact, by March 2024, individual borrowers made up 91% of all household borrowing. People mainly borrow money for three reasons:

1. Daily Needs and Spending
2. Personal loans for various needs
3. Credit card payments
4. Buying things like refrigerators and TVs
5. Building Assets
6. Buying homes (through home loans)
7. Buying cars and motorcycles
8. Making Money
9. Loans for farming
10. Business loans
11. Education loans

The Quality of Borrowers Here’s something interesting: most people borrowing money (about two-thirds) are what banks call “good borrowers” – they have good credit scores and regularly pay back their loans on time.

Different Patterns for Different People

• People with lower credit scores (called “subprime borrowers”) usually take loans for daily expenses
• People with excellent credit scores (“super-prime borrowers”) mostly take loans to buy valuable things, especially houses
• The amount borrowed per person has gone up the most among super-prime borrowers, while others have kept their borrowing steady

Why This is Good News The RBI sees these trends as positive because:

• More reliable borrowers are taking loans
• These loans are being used to buy valuable assets like houses
• This makes the whole banking system stronger and safer

The Bigger Message This information shows us how Indian families are changing in the way they use loans. More people now have access to bank loans, and different families need different types of loans based on their situations.

What’s particularly important is that while more Indians are borrowing money, they’re doing it responsibly, and many are using loans to build long-term wealth through assets like homes and businesses.