Indian households are increasingly relying on debt to finance their lifestyles, marking a significant shift from traditional saving habits. This "swipe now, pay later" culture has led to a substantial increase in individual debt, raising concerns about the financial well-being of future generations.
The average debt per individual borrower in India has surged to ₹4.8 lakh by March 2025, a 23% jump in just two years from ₹3.9 lakh in March 2023. This increase is primarily fueled by non-housing retail loans, including personal loans, credit cards, and auto loans, which now constitute 54.9% of total household debt as of March 2025. In contrast, home loans account for only 29% of the total household debt. This trend indicates a growing inclination towards consumption-oriented borrowing rather than asset creation.
The rise of Buy Now, Pay Later (BNPL) services has significantly contributed to this debt accumulation. BNPL offers consumers a frictionless credit experience, even to those with limited or no credit history, making it an attractive option for financing purchases. The Indian BNPL market is projected to reach $19.36 billion by 2024 and is expected to grow at a CAGR of 12% from 2023 to 2028. This rapid expansion has led to concerns about overspending and potential defaults, as consumers may accumulate debts beyond their repayment capabilities.
CoinSwitch co-founder Ashish Singhal has voiced concerns about the potential consequences of this "spend now, pay later" mindset, particularly for Gen Z. He highlighted the trend of young Indians taking out loans for vacations and other lifestyle expenses, often through personal loans and EMI plans. Singhal noted that Gen Z's share of vacation loan takers has nearly doubled in just two years, with many financing their travels with personal loans and EMI plans which frequently result in payments that are much more than the initial outlay. He questioned what will happen to this generation when they reach their 40s and 50s, facing the long-term implications of their current borrowing habits.
While household debt in India is still relatively low compared to other emerging market economies, the rapid increase in consumption-driven borrowing raises concerns about financial stability. Credit card defaults are also on the rise, particularly among millennials and Gen Z, with outstanding amounts reaching ₹2.7 lakh crore by June 2024. This surge in defaults is attributed to the ease of access to credit, the popularity of EMI-based purchases and BNPL schemes, and a lack of awareness about how credit cards work.
To mitigate these risks, experts recommend promoting financial literacy, encouraging responsible credit usage, and implementing stricter regulations on BNPL and other lending platforms. Consumers are advised to create budgets, save for large purchases, and use credit cards wisely, ensuring bills are paid in full to avoid accumulating debt.
