Mumbai: Non-housing retail loans, largely for consumption, accounted for 55.3% of household borrowings in the first half of FY26. Housing loans accounted for 28.6%, while agriculture and business loans comprised 16.1%, according to Reserve Bank of India (RBI) data.
The segment of retail consumer loans has grown consistently since March 2019, surpassing the shares of housing loans, agriculture loans, and business loans, RBI said in its Financial Stability Report for December 2025.
Worryingly, the higher share of personal loans stands atop the expansion in the overall indebtedness levels of Indian households, which surged past its five-year average to reach 41.3% of the gross domestic product (GDP) in the last financial year.
“The household-level indebtedness marked a ‘sustained increase compared to its 5-year average of 38.3%,’” the report said, adding, however, that the household debt level remains lower ‘relative to most’ peer emerging market economies (EMEs).
India’s household indebtedness level was lower than that of Chile, China, Malaysia, and Thailand, for whom the levels ranged from 45.1% to 88% of GDP, but was higher than that of South Africa and Brazil, where the levels were 33.8% to 36.6% of GDP. India’s real GDP grew 8.2% in Q2 FY26, up from 7.8% in the previous quarter and 7.4% in Q4 of FY25, largely led by strong domestic demand.
RBI data showed that loans taken for consumption purposes had the dominant share, with personal loans accounting for 22.3%. They were followed by loans taken for asset creation, such as housing loans, and then those taken for productive purposes.
The surge was in part driven by the increase in the share of better-rated customers, both in terms of the outstanding amount and the number of borrowers, which RBI said indicates that the overall resilience of the household sector remains ‘sound’.
“Risk profile of borrowers availing loans for consumption and productive purposes has shown improvement, with the share of prime and above borrowers in outstanding loans showing an increasing trend,” it said. According to the report, the category of ‘prime and above rated’ borrowers accounted for 56.2% of total household loans in terms of volume and 70.4% in terms of loan value as of September 2025. On the other hand, the share of ‘subprime’ borrowers in the total number of loans was 23% whereas it was 10.2% in terms of the value of loans taken.
Saving trends
Meanwhile, net household financial savings, too, improved to 7.6% of GDP in Q4 FY25. This was due to a rise in financial assets and the stabilisation of liabilities, while the stock of gross financial assets remained steady above 100% of GDP, RBI said.
However, growth in the financial wealth of households moderated, reflecting a correction in equity and investment funds.
In terms of asset allocation, deposits and insurance and pension funds accounted for 69.2% of household financial wealth as at the end of March 2025, even as the share of equities and investment funds increased marginally.
Quoting a Securities and Exchange Board of India (Sebi) survey, the report said that despite growing awareness about securities market products, overall household penetration remained at 9.5% of the 337.2 million total households, primarily from urban centres.
“Within the securities market, however, equity remains the dominant asset class for households. Therefore, diversification of household savings to asset classes other than equity and bank deposits has the potential to aid financialisation of savings and long-term capital formation,” it said.
