India’s household debt has been growing over the last few years. It has jumped from 36.4% of the gross domestic product as of June 2022 – the earliest data available – to 45.9% of the GDP as of March 2026. 

What does this tell us? 
First, households are borrowing much more than before. In fact, the total household borrowing in 2025-26 went up 37% in comparison to 2024-25. There are multiple reasons for this.

Thanks to the digital revolution, it is much easier to borrow now. Also, with the extensive use of UPI to make payments, lenders now have data to figure out the payment capacity of individuals working in the informal sector and lend to them. This was difficult to do earlier.

A report by the FinTech Association for Consumer Empowerment, or FACE, points out that between April 2022 and March 2026, fintech companies, which it classifies as digital NBFCs, disbursed 132 million loans worth ₹2.15 trillion. This works out to an average loan size of just ₹16,238. The trend has continued.

Another FACE report shows that during April to June 2026, digital NBFCs sanctioned 34 million loans worth ₹647 billion. The average loan size was ₹18,802.

Interestingly, the fintechs now give out 22% of loans by value. The figure was at 12% in 2022-23.

Second, the household debt as of March 2026 stood at ₹158.5 trillion or 45.9% of the GDP. It was at ₹89.1 trillion or 36.4% of the GDP as of June 2022.

Why? While the overall economy has been growing at what seems like a fast pace, the increase in individual incomes has been rather subdued. 

The irony here is that the overall economic growth isn’t really translating into similar increases in income at the individual level. The rich are capturing a larger share of the growing economy. 

The average salaried income in 2022 stood at ₹19,316 per month. It jumped to ₹22,699 per month in 2025, an increase of 5.5% per year on average. 

The average income of a self-employed individual went up from ₹12,732 per month in 2022 to ₹14,861 per month, at the rate of 5.3% per year on average. 

The salaried and the self-employed make up for around 80% of the workforce.

The income growth is barely enough to meet the price rise. So, it is hardly surprising that people are borrowing more. This slow increase has pushed people towards loans to meet their consumption needs.

In fact, as the Reserve Bank of India pointed out in its latest edition of the Financial Stability Report: “The increase [in household debt] has been driven primarily by non-housing retail loans, which constitute 58.4% of total borrowings as of March 2026.”

As it further points out: “Consumption-related loans remained the primary driver of household borrowings.” Loans are being taken out largely for consumption purposes and not for asset creation. And that is a problem. 

Third, the overall household debt was at ₹137 trillion as of March 2025. It grew 16% to ₹158.5 trillion as of March 2026.

Further, the RBI’s Financial Stability Report of June 2025 points out, the average debt per individual borrower was at ₹390,000 in March 2023 and ₹480,000 in March 2025, a jump of 23% in just two years.

When we put these data points together, it is safe to conclude that the average debt figure would have grown further by March 2026, although the RBI’s latest Financial Stability Report does not provide an updated figure.

Fourth, RBI’s latest Financial Stability Report says that Indian households carry more debt than households in Chile, Brazil and South Africa, but less than those in China, Malaysia and Thailand.

However, a simple comparison of household debt across countries can be misleading. As the RBI itself pointed out in its June 2024 Financial Stability Report, India’s household debt may be relatively low compared with other emerging economies, but it is high when measured against the country’s per capita income. 

In other words, the ability of Indian households to carry debt needs to be seen in the context of how much they earn, especially at a time when incomes have barely grown enough to meet the rate of inflation. At a broader level, this points to a lack of economic activity that can generate income growth for large sections of the workforce.

Fifth, the growth in household debt has been boosting consumption growth as well. But all loans need to repaid and beyond a point the lenders can’t really lend without compromising on the quality of the borrowers – that as we shall see already seems to be happening.

In fact, Renu Kohli, a senior fellow at the Centre for Social and Economic Progress, makes an excellent point, when she writes that, in 2025–26, household debt grew roughly four times as fast as disposable income. While this was lower than the sevenfold gap seen in 2022–23, it matched the ratio seen in 2017–18, after which the boost to consumption faded within a year or two.

Or as Kohli aptly puts it: “Debt can only buy time”.

Sixth, the rising amount of loans against gold jewellery, or gold loans as they are more popularly referred to as, have also had a role to play here.

The rising price of gold has allowed lenders to lend more. Interestingly, between June and September 2022, the increase in gold loans contributed around 1.6% of the increase in household debt. 

This had jumped to 11.3% between December 2025 and March 2026. Gold prices peaked in January 2026 and have fallen since.

Lower gold prices won’t allow lenders to lend as much as they were against the same amount of gold. Also, the gold loans data coming out doesn’t inspire confidence. 

In a previous piece, I had pointed out that gold seems to have become an option of last resort for a section of the stressed borrowers. As Bhavesh Jain, MD & CEO, TransUnion CIBIL, said in a July 2026 interview to The Hindu Business Line, one in every five gold loans goes to a borrower who already has another loan that has turned into a non-performing asset.

This is something that was echoed by Piramal Finance recently, in a post results conference call: “Two years ago… 20% to 25% of customers had an active gold loan outside. That number is now above 35% in all product categories. Secondly, in financial year '26 (2025-26), across the industry, approximately ₹4.7 trillion of gold loan disbursements happened to customers in deep delinquency, i.e., more than 90 days past due.”

As it further said: “23% of gross disbursements in gold loans over the last year have happened to customers who are 90 days plus past due on at least one of their live trades. A shockingly high number.”

What this means is that many gold loans are now being given to repay past gold loans, making them a Ponzi scheme.

This is something that cannot continue indefinitely. Taken along with the fall in the price of gold, the growth in gold loans is bound to slowdown, slowing down the growth in overall household debt as well.

India’s rising household debt tells us something important about the state of the economy. When incomes don't grow fast enough, borrowing becomes a way of maintaining consumption. 

Easier access to credit, digital lending and rising gold prices have made this possible. But debt is not income. Every loan has to be repaid, and there is a limit to how much households can borrow.

The growing dependence on loans to fund consumption, along with signs of stress in gold lending, suggests that this source of consumption growth may not last indefinitely. Eventually, incomes need to do the heavy lifting.