India, July 1 -- The pieces of the Great Indian Credit Boom puzzle have been around for some time now, and analysts have engaged individually with them. But a holistic macroeconomic consensus, in fact even a debate is yet to emerge. To be sure, we do not even know whether the changes on this front are structural or one-off. All these caveats notwithstanding, the original question is still worth engaging with in detail and, more importantly, objectively. The discussion which follows tries to do justice to this task by breaking it up into five subsidiary questions. The answer seems to be an unambiguous yes, no matter what side one looks at it from. Household balance sheets, as seen in the National Account Statistics data released by the government shows that net household savings have fallen, primarily because of a rise in financial liabilities in the post-pandemic period in India. The jump, if one were to look at it in the last two years for which data is available (2022-23 and 2023-24) is significant even by historical standards, although it does seem to have stalled. (See Chart 1) The importance of rising household debt also shows up in the rising personal loan to GDP and Private Final Consumption Expenditure (PFCE) ratio in the economy. A comparison from 2007-08 to 2024-25 shows that personal loan to GDP/PFCE ratio fell between 2007-08 till 2013-14 and started rising thereafter, first at a gradual pace, and then rapidly in the post-pandemic period. Outstanding personal loans by Scheduled Commercial Banks (SCBs) as a share of PFCE have almost doubled from 15.6% in 2013-14 to 29.6% by 2024-25. The takeaway is simple. A larger part of GDP and PFCE is being generated by spending from personal loans now than was the case earlier. As is the case in household financial savings data in NAS shown above, the trend finally seems to be flattening in the last couple of years (more on this later). (See Chart 2) Even for banks, personal loans have become the biggest component of their outstanding credit portfolio. RBI data from the Centre for Monitoring Indian Economy (CMIE) database shows that personal loans amounted to almost one-third (32.7%) of total outstanding non-food credit in 2024-25, higher than the share of agriculture, industry or services in total outstanding loans. While share of agriculture and services has been largely constant in the period between 2007-08 and 2024-25, for which this data is available, industry shows a fall in its credit share and personal loans show a large increase. To be sure, some of the fall in share of industry in total outstanding credit could well be the result of banks getting rid of or even writing off the large Non-Performing Assets (NPAs) which they accumulated between the late 2000s and first half of 2010s. Still, the fact remains that personal loans have emerged as the biggest business for banks. It is not just households which are more dependent on credit to buy what they want to -- even the banks are relying on households to generate more business for themselves. (See Chart 3) This is perhaps the most important question to ask if one is trying to understand the dynamics and consequences of growing economic importance of personal loans in the Indian economy. Are households borrowing money from banks to do something else compared to what they used to borrow for in the past. The best way to answer this question is to look at the composition of housing loans in historical time. RBI data in the CMIE database gives this break-up from 2007-08 to 2024-25. Housing loans alone account for almost half of total outstanding personal loans. While this number has fluctuated by a couple of percentage points during this period, it is still by far the most dominant component of personal loans. Then there are categories such as education loans and loans against advances (of fixed deposits etc.) which show a secular decline during this period. While the drop in loans for consumer durables could appear counter-intuitive, it could well be a case of shifting categories (people buying their iPhones and washing machines on credit cards rather than a bank loan). Vehicle loans once again are broadly consistent at about one-tenth of total personal loans. What does show a big increase in the data is the rise in share of gold loans and other personal loans in the total personal loan portfolio. While the former is a household mortgaging its physical asset to get a loan, the latter, if one applies intuitive wisdom and anecdotal experience of banks trying to sell loans, is most likely to be the case of households borrowing to finance their current consumption requirements, with banks happy to oblige. In other words, this could well be the binge component of the household credit. Maybe people are borrowing money to take a foreign trip, throw a party or just because they are short of money to pay their regular bills. (See Chart 4) Personal loans and household credit are important indicators but they do not tell us the entire story of the recent rise in household credit in the Indian economy. This is where RBI's organizational classification of household credit can provide some insights. This data is available from March 2014 to March 2025 from RBI. It shows a sharp fall in the share of the private non-financial corporate sector in total outstanding credit and an even bigger rise in the share of the household sector during this period. RBI classifies the household sector into individuals (male and female) and other household sector entities such as joint families and non-governmental organizations etc. The data shows that it is individuals in the household group that have driven the rise in overall share of households in total outstanding credit. This number went from about 32% in March 2014 to 47% in March 2025. A gender-wise break-up of the data shows that the gap between men and women in terms of access to credit has fallen by almost 20% during this period. Is this a result of more women getting into salaried jobs - an analysis by Rosa Abraham and Amit Basole in these pages made this observation - and being able to access more credit? Is it because of various financial inclusion schemes by central and state governments in the country? Reaching a definite conclusion requires access to more granular data on borrowers which is not available in the public realm. Another sector which has seen a huge spike in share in total outstanding credit in proportional terms is microfinance . While it had a share of just 1.7% in total outstanding credit in March 2025, in proportional terms the increase was almost four times, by far the biggest across all classifications in the data. Has financial inclusion and the fintech revolution in India nudged a lot of players in the microfinance market in India? Are they moving in to formalize the erstwhile informal credit market? Once again, this is an interesting and important question to ask because if fintech and financial inclusion have brought the poor within the realm of bank lending then they might have experienced an improvement in their economic condition because of moving from a significantly high-cost informal credit economy to a low-cost and less predatory bank lending ecosystem. Once again, ascertaining this claim will require more data than is available in the public realm. One could get some idea on the formal-informal distribution of credit from the All-India Debt and Investment Survey (AIDIS) which gives a breakup of formal and informal credit across asset classes. The advanced release calendar of the Ministry of Statistics does not have a date for the new AIDIS release. (See Chart 5) The short answer seems to be no. Latest available data on Non-Performing Assets (NPAs) across various kinds of credit shows that personal loans do not show a higher stress than loans to agriculture, industry or services. More importantly, the category of other retail loans - other personal loan category has seen the fastest growth in overall share in credit - shows NPA levels which have been falling since the pandemic; it was just 1.2% in June 2024. To be sure, there does seem to be a difference between stress in loans of private and public banks in the retail loan category, but that is to be expected. Private banks typically tend to more high-income consumers and therefore are likely to see lower defaults. (See Charts 6A, 6B) While there is no reason to raise an alarm as of now, it is always better to err on the side of caution when it comes to rising debt in a country like India where an overwhelming majority has low incomes and precarious employment. On a more serious note, two hypothetical questions can be raised. Is the typical Indian household living beyond its means, not in the sense of defaulting on its debt tomorrow, but not saving enough for the medium-term or post-working-age future? If that is the case, the pain of a debt binge will come with a significant time lag. Two, even at a time when the average Indian has let loose not just their purse strings but even the loan books, why is it the case that manufacturing and private investment continues to remain sluggish in the country? If one were to end on an extremely provocative note, are Indians borrowing money to fund industrial production in other countries while the domestic industry remains moribund?...