New Delhi, Oct. 30 -- India's household savings as a proportion of our GDP is declining. In its latest Financial Stability Report (June 2024), the Reserve Bank of India has also noted that while net financial savings have declined in 2022-23, financial liabilities have gone up thanks to retail loans for consumption and investment.

The personal loan portfolio of scheduled commercial banks saw an increase of 21% in 2022-23 and around 27.5% in 2023-24. Clearly individuals are spending more and doing so with the help of loans.

The lure of personal loans isn't without reason. These are flexible loans, the funds from which can be used for any purpose, they don't require a collateral and there is minimum documentation needed. Some lenders will...