Great Indian Credit Boom Puzzle pieces have been there for some time, and analysts have been engaged with them personally. But an overall macroeconomic consensus, actually even a debate is to emerge. To ensure this, we do not even know whether changes on this front are structural or united. Despite all these warnings, the original questions are still worth expanding and, more importantly, impartially attached. Discussion that tries to do justice to this task by breaking it into five supporting questions.
Is there a domestic credit in India?
The answer seems to be a vague yes, no matter what anyone sees on him.
The domestic balance sheet, as seen in the National Account Statistics data released by the government, indicates that net domestic savings have declined, mainly due to an increase in financial liabilities in India-political period. Jump, if someone had to see it in the last two years, for which data is available (2022-23 and 2023-24) is also important by historical standards, although it seems that it has come to a standstill.
(See Chart 1)
The importance of increasing domestic loans is also visible in the increasing individual loan for GDP and private final consumption expenditure (PFCE) ratio in the economy. Comparison from 2007-08 to 2024-25 suggests that the individual loan for GDP/PFCE ratio fell between 2007-08 to 2013-14 and then started growing, first at a gradual speed, and then rapidly in the later period. Personal loans outstanding by Scheduled Commercial Banks (SCB) as part of PFCE have almost doubled by 15.6% in 2013-14, to 29.6% by 2024–25. Tech uve is simple. A large part of GDP and PFCE is being generated by spending from individual loans, which was also earlier. As shown above in domestic financial savings data in NAS, this trend has finally been leveling over the years (later more on it).
(See Chart 2)
Even for banks, personal debt has become the largest component of their outstanding credit portfolio. The Center for Monitoring Indian Economy (CMIE) database shows RBI data that individual loans 2024-25 have an amount of about one-third (32.7%) of total outstanding non-food credits, more than the share of agriculture, industry or services in total outstanding loans. While the share of agriculture and services has been largely stable in the period between 2007-08 and 2024-25, for which this data is available, the industry shows a decline in its credit share and individual debt shows a major growth. To ensure that, some of the fall out of the total outstanding credit may result in the result of getting rid of banks or writing large non-performing assets (NPAs), which they deposited between the late 2000s and the first half of the 2010 decade. Nevertheless, the fact is that individual debt has emerged as the largest business for banks. It is not only in homes that are more dependent on credit to buy what they want – even banks and even houses are relying on homes to generate more business for themselves.
(See Chart 3)
Has the creation of domestic debt in India changed?
It is probably the most important question to ask whether one is trying to understand the dynamics and consequences of increasing economic importance of individual loans in the Indian economy. In the past, they are borrowing money from banks to do anything more than what they borrowed to borrow in the past. The best way to answer this question is to see the composition of housing debt in historical times. RBI data in the CMIE database gives this brake-up from 2007-08 to 2024-25. Housing loans alone account for about half of the total outstanding individual loans. While this number has raised a few percentage points during this period, it is still the most prominent component of individual debts. Then there are categories such as loans (fixed deposits etc.) against education loans and advances that show a secular decline during this period. While the decline in debt for consumer durables may appear to be counter-counted knowledge, it can be a case of well-shifting categories (people who buy their iPhones and washing machines on credit cards instead of bank loan). Vehicle loans are once again roughly consistent in about tenth of the total individual loans. There is an increase in the share of gold loans and other individual loans in the total individual debt portfolio, what the big increase in data shows. While the former is a domestic, who mortgages his physical property to receive a loan, if a person implements the intuitive knowledge and experiences of banks trying to sell loans, most likely it is that homes are likely to borrow to borrow to meet their current consumption requirements, are happy to bind banks. In other words, it can be well a biping component of domestic credit. Maybe people may make a foreign trip, throw a party or just because they are less than money to pay their regular bills.
(See Chart 4)
Who is really borrowing more money from banks?
Personal debt and domestic credit are important indicators, but they do not tell us the full story of recent rise in domestic credit in the Indian economy. This is the place where RBI’s organizational classification of domestic credit may provide some insight. This data is available from RBI from March 2014 to March 2025. This reflects a sharp decline in the share of private non-financial corporate sector in total outstanding credits and even more growth in the domestic area during this period. The RBI classifies the domestic sector into individuals (male and female) and other domestic sector institutions such as joint families and non-governmental organizations etc. Data shows that it is individuals in the domestic group who have increased the overall part of the houses in the total outstanding credit. This number increased from around 32% in March 2014 to 47% in March 2025. A gender-wise brake-up of data suggests that the difference between men and women has fallen by about 20% in terms of access to credit during this period. Is this the result of more women being involved in salaried jobs – an analysis by Rosa Abraham and Amit Bastol in these pages visited this – being able to reach more credit? Is this due to various financial inclusion schemes by the Central and State Governments in the country? To reach a certain conclusion, more granular data on borrowers requires access to granular data that is not available in the public realm.
Another region that has seen a large spike in the stock in the total outstanding credits in proportional conditions is microfinance. While in March 2025, the total outstanding credit stake was just 1.7%, the proportional increase was about four times, the largest in all the classifications in the data so far.
Has financial inclusion in India and Fintech revolution in India naked many players in the microfinance market in India? Are they proceeding to formalize the preceding informal credit market? Once again, this is an interesting and important question to ask because if Fintech and Financial Inclusion has brought the poor under the purview of bank borrowings, they must have experienced improvement in their economic condition as a low cost and low hunter bank lending ecosystem has been transferred from a fairly high -cost informal credit economy. Once again, more data will be required to detect this claim more data than being available in the public scope. The All India Loan and Investment Survey (AIDIS) can get some views on the formal list of credit, which gives a formal and informal credit breakup in the asset classes. The advanced release calendar of the Ministry of Statistics does not have a date for the new Aidis release.
(See Chart 5)
Is there a ‘sub-prime’ component in rapid growth in domestic credit?
There is no brief answer. The latest available data on non-performing assets (NPAs) in a variety of credit shows that individuals do not show much stress than loans for agriculture, industry or services. Even more importantly, the category of other retail loans – other individual debt category has seen the fastest growth in the overall stake in credit – shows NPA levels that have been falling since the epidemic; It was just 1.2% in June 2024. To ensure this, there seems to be a difference between tension in the loans of private and public banks in the retail loan category, but it is expected. Private banks are usually for high -income consumers and therefore there is a possibility of less lapse.
(See Chart 6A, 6B)
So, is the recent domestic credit good for a biping economy?
Although there is no reason to raise an alarm so far, it is always better to be wrong in favor of caution when it comes to increasing loans in a country like India where an overwhelming majority have low income and uncertain employment. On a more severe note, two imaginary questions can be raised. Are specific Indian domestic living beyond their means, not in the sense of lapse on their debt tomorrow, but do not save enough for the medium period or post -work after the future? If so, a debt biping pain will come with a significant time interval. Two, even at a time when the average Indian has loosened not only their purse string but also debt books, even why it is that manufacturing and private investment in the country remain dull? If one ends on a very stimulating note, are Indians borrowing funds for industrial production in other countries while domestic industry remains morality?
