Consumer borrowing rose roughly four times faster than disposable income in 2025-26, heavily driven by digital loans under 100,000 rupees. Meanwhile, average real earnings for regular salaried employees grew less than 4% over the three years through 2025. Facing mounting distress, borrowers are increasingly turning to collateralized credit, causing loans taken against gold jewelry to surge nearly 45% in the year through March to pay off defaulted debts.
Key points
Borrowers are increasingly resorting to gold jewelry loans to service and stay current on…: Borrowers are increasingly resorting to gold jewelry loans to service and stay current on existing defaulted debt obligations.
Upcoming projected interest rate hikes of 75 to 100 basis points will compound financial…: Upcoming projected interest rate hikes of 75 to 100 basis points will compound financial pressures on leveraged middle-class families.
Disproportionate non-mortgage liabilities make Indian consumers among the most financiall…: Disproportionate non-mortgage liabilities make Indian consumers among the most financially constrained in the world relative to their earnings.
Sources checked by our analysis pipeline: 1
Soon, repayments were eating up nearly half of Singh’s paycheck. To keep up with the bills, Singh cut back on eating out and buying clothes, canceled his gym membership and eventually gave up playing snooker.
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“Loans were an easy way to buy whatever I wanted. You live only once,” Singh said. “Monthly installments seem convenient at first, but you don’t realize how quickly you can get sucked into a cycle of repayments.”
Household borrowing surged 36% in the year through March, taking consumer debt to a record 46% of gross domestic product, according to central bank data. While low in comparison to heavily indebted households in countries like the US and Australia, when excluding mortgage debt Indian consumers are among the most constrained in the world, according to estimates from CLSA, a Hong Kong-based brokerage and investment group.
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