Indian Borrowers Splurge: Only 28% of Loans Go to Homes, Rest Fuel Consumption Wave—RBI

A new Reserve Bank of India (RBI) report reveals that only 28% of household loans in India are used for home purchases, while a striking 55% are non-housing loans taken mainly for consumption purposes. The latest Financial Stability Report highlights a shift in borrowing patterns, with asset-building loans lagging behind personal and consumption-driven credit.

 

Key Highlights:

 

•⁠  ⁠Home Loan Share: Housing loans account for just 28–29% of total household debt, with the majority of new borrowing coming from existing homeowners seeking additional credit rather than first-time buyers.

 

•⁠  ⁠Consumption Loans Surge: Non-housing retail loans, such as personal and consumer durable loans, now make up 55% of household debt and have consistently outpaced the growth of housing, agriculture, and business loans.

 

•⁠  ⁠Borrower Profile: Over half of all loans are held by prime and above-rated borrowers, indicating resilience in household balance sheets, while only 22% are sub-prime.

 

•⁠  ⁠Rising Debt: Per capita household debt has climbed from ₹3.9 lakh in March 2023 to ₹4.8 lakh in March 2025, driven mainly by higher-rated borrowers.

 

•⁠  ⁠Financial Stability: Despite rising debt, the RBI notes that risks remain contained, with easing monetary policy expected to reduce debt servicing pressures.

 

Outlook:

The trend toward consumption-driven borrowing underscores the need for close monitoring, especially among lower-rated borrowers, even as India’s financial system remains broadly stable.

 

Source: Economic Times