Access to credit, whether for a government, business or individual, is an integral part of any growing economy. At the household or individual level, borrowing money in a responsible manner can allow for important purchases and investments such as a home, a vehicle or education. We analysed the latest data from the Reserve Bank of India (RBI) and Bank of International Settlements (BIS) to help consumers understand the current state of household debt in India, trends over time and how India compares to other countries.
- Key Findings
- Current Household Debt per Capita
- Household Debt per Capita Since 2015
- Household Debt Relative to the Economy
- Total household debt per person in India is Rs. 16,239 as of January 2019
- Home loans still dominate with >50% share of total household debt and have been growing steadily
- High-interest debt like personal loans and credit card outstandings have been the fastest growing categories since 2015 and now comprise 35% of total household debt
- India's 11.3% household debt-to-GDP ratio is the lowest among BRIC countries (Brazil, Russia, India and China) and magnitudes lower than more mature economies like Japan and the U.S.
Household Debt per Capita 2019
As of January 2019, household debt per person in India stands at Rs. 16,239. Home loans represent a majority of this amount: Rs. 8,517 (52.4% of total). Vehicle loans comprise Rs. 1,524 (9.4% of total), the second largest proportion among specific-purpose loans. Education loans stand at Rs. 526 per capita (3.2% of total) and credit card outstandings amount to Rs. 640 (3.9% of total). Other types of personal loans comprise a substantial proportion of per capita household debt (31.0%), standing at Rs. 5,033.
Household Debt per Capita Since 2015
Examining data since 2015, household debt per person has grown at an average annual rate of 16%, from Rs. 9,017 to Rs. 16,239. Notably, these numbers are unadjusted for inflation or income/GDP growth. The rate is much more modest considering the growth of India's economy, which we use as one normalizing factor and discuss at the end of this analysis.
Since a home is often the largest purchase someone makes in his or her lifetime, it is understandable that housing is the largest segment of household debt. Since 2015, home loans per person have grown fairly steadily at an average annual rate of 15% (unadjusted) from Rs. 4,824 to Rs. 8,517. However, as a percentage of total household debt in India, such loans have declined slightly from 53.5% in 2015 to 52.4% in 2019.
The nominal growth of vehicle loans per capita in India has been slowing since 2015. After growing 14% and 17% in 2016 and 2017, respectively, 2018 and 2019 saw growth of about 9% each year (unadjusted). Similarly to home loans, vehicle loans have also declined somewhat as a percentage of total household debt, shrinking from 10.8% in 2015 to 9.4% in 2019.
Education loans per capita experienced modest growth of 6% and 4% in 2016 and 2017, respectively, but have since declined 2-3% in both 2018 and 2019 (unadjusted). Due to this stagnant growth versus other categories, education loans have shrunk dramatically from 5.6% as a percentage of total household debt in 2015 to 3.2% in 2019.
Credit Card Outstandings
Credit card outstandings per person have grown consistently and rapidly since 2015, averaging 27% annually (unadjusted). This strong growth has resulted in a substantial increase in card outstandings as a proportion of total household debt from 2.7% in 2015 to 3.9% in 2019. Although not explicitly noted by RBI, we suspect credit card figures include a meaningful amount of balances that get paid down monthly. So, the amount of card debt on which consumers are paying very costly interest rates is likely materially smaller.
Other Personal Loans
Other personal loans per capita have grown 19% on average from 2015 to 2019 (unadjusted), which is the second highest rate among all categories after credit cards. This strong growth has driven other personal loans to 31.0% of total household debt in 2019, up from 27.4% in 2015.
Household Debt Relative to the Economy
Although total household debt in India has grown at an average annual rate of 16.9% since 2015, it is important to consider this trend in light of the country's relatively large, high-growth economy. When normalized against GDP, household debt has grown at a more modest average annual rate of 6.2% over a similar time period. Household debt-to-GDP stands at 11.3% as of Q4 2018, up from 8.9% in Q4 2014, according to the latest data available from the Bank of International Settlements.
Further, India's ratio is the lowest among BRIC economies (Brazil, Russia, India and China), which in turn have lower ratios compared to more mature economies like Japan and the United States.