Household debt in India has risen to about 43% of GDP, up from just over 35% in March 2020.
Nomura economists described India's household stress as "K-shaped," with low-income households taking on more consumption loans (unsecured) while wealthier households are using debt to buy assets.
The RBI highlighted growing stress in retail loans, especially among unsecured creditors.
Many subprime borrowers have more than three active personal loans.
The RBI's macroprudential tightening measures have slowed the growth of retail credit.
The write-offs of unsecured retail credit have sharply increased, as have delinquency rates, particularly in the microfinance sector.
Although the Gross Non-Performing Assets (GNPA) ratio for banks is low at 2.6%, RBI's stress tests predict it could rise to 3% by 2025-26.
Nomura believes India is in a cyclical economic slowdown, with weak GDP growth forecasted at 6% in 2024-25 and 5.9% in 2025-26.
The rising household stress aligns with weak urban consumption, which is also K-shaped—better-off consumers are spending on assets, while lower-income groups struggle with debt.
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