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India’s Falling Loan Defaults Mask Rising Household Debt Risks

India’s Falling Loan Defaults Mask Rising Household Debt Risks
India’s bad loans are falling, but a bigger banking risk may be building beneath the surface · businesstoday.in

People in India are borrowing more money, and their debt is growing faster than the economy per person.

Some families may be borrowing to manage living costs or keep buying things.

Loan growth has picked up, though it is not rising equally for every kind of loan.

Fewer personal-loan borrowers are falling behind on payments than before.

But that does not necessarily mean families have less debt or are financially safer.

A person might pay current bills while taking on more loans.

If their income falls or borrowing becomes harder, repaying could become difficult.

Banks and other lenders need to check whether borrowers can afford all their loans.

Key facts

Leverage intensity ratio
India stood at 2.1 during FY19–26, compared with China at 2.0, Malaysia at 1.3 and Thailand at 1.1.
Household debt
46% of GDP.
Non-mortgage borrowing
27% of GDP, up from around 16% in 2019.
Non-food bank credit growth
Rose from 9.9% in July 2025 to 19.1% in July 2026.
Retail credit growth
Rose from 11.9% in July 2025 to 16.2% in July 2026.
Personal-loan defaults
One-year default rates declined from 0.51% to 0.35%.
Private final consumption expenditure
Grew 7.7% in FY26, compared with 5.8% in FY25.

Sources

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