Household sector debt climbs to 45.5% of GDP in Sep 2025: RBI report

New Delhi: The overall debt of the household sector reached 45.5 percent of the country's gross domestic product (GDP) due to an uptick in non-housing retail loans, according to the RBI's latest Financial Stability Report (FSR).

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The Reserve Bank of India said the increase in household sector debt was due to rising non-housing retail loans, which constituted 58.4 percent of total borrowings as of March 2026. Their share has increased steadily over time, consistently outpacing housing loans, agriculture and business loans.

Overall, despite the rise in household borrowings, borrower profiles have continued to improve. The share of higher-rated borrowers (prime and above) has increased in terms of both outstanding amounts and the number of borrowers. This improvement is evident across both consumption and productive loans, with a growing share of prime and above borrowers in total outstanding credit, the report said.

Household debt as a share of GDP has remained above its five-year average of 42.9 percent since September 2023, the report said.

It can be noted that experts have been consistently flagging concerns on the increasing household debt, pointing out that an increased quantum of resources is going towards consumption expenses for servicing loans for depreciating assets like vehicles.

Among emerging market economies, India stands fourth after China (third position with household debt of 59 percent of GDP, Malaysia (69.9 percent), and Thailand (87.3 percent), the RBI said.

In terms of broad categories, loans for consumption purposes, asset creation, and productive purposes, those availed for consumption purposes account for nearly half of total household borrowings.

Consumption-related loans remained the primary driver of household borrowings, followed by loans for productive purposes, whereas borrowing for asset creation expanded at a relatively slower pace, the RBI said.

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The central bank noted a notable shift in banks' housing loan portfolios over time. Previously, outstanding loans below the Rs 25 lakh credit limit dominated (60.6 percent of total housing loan outstanding as of March 2014), reflecting a focus on affordable housing.

In recent years, loan distribution has moved toward higher-value segments, with the share of Rs 50 lakh and above credit limits now accounting for 44.7 percent of outstanding loans. Notably, non-performing housing loans remain low for banks and have declined from pre-COVID levels, falling to 0.5 percent in March 2026 from 1.2 percent in March 2019, the report said.

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