Letters to the Editor: Loan dependency among India’s middle class

Loan dependency among India’s middle class

The growing dependence on loans among India’s middle class is emerging as a serious economic concern that deserves wider public discussion. Traditionally known for its saving culture, the Indian middle class is increasingly turning to credit to maintain living standards amid rising costs of housing, education, healthcare, and daily essentials.

Recent data from the Reserve Bank of India (RBI) reveals that household debt in India had climbed to 41.3 per cent of the country’s GDP by March 2025, exceeding the five-year average of 38.3 per cent. A significant portion of this borrowing is driven by consumption-orientated loans rather than long-term asset creation. In fact, non-housing retail loans such as personal loans, credit cards, and consumer durable financing account for more than 55 per cent of total household borrowing.

Studies also indicate that many middle-class households now spend a substantial part of their income on loan repayments. Research suggests that debt servicing can consume nearly 40 per cent of annual household income, reflecting how deeply credit has entered everyday financial life.

While easier access to credit and financial inclusion have helped many families meet aspirations such as home ownership, vehicles, or education, the rapid rise of unsecured loans raises concerns about long-term financial stability. If income growth fails to keep pace with borrowing, many households could face a dangerous debt trap. It is therefore crucial for policymakers and financial institutions to promote financial literacy, responsible lending, and stronger consumer protection. Encouraging savings alongside credit use will be vital to ensure that the aspirations of India’s middle class do not turn into a cycle of unsustainable debt.

Bhaskar Deka

(dekabhaskar937@gmail.com)