Executive Summary:
This document is a response to Lok Sabha Starred Question No. 312 regarding the increase in household debt. The statement, delivered on August 11, 2025, by the Finance Minister, Smt. Nirmala Sitharaman, addresses concerns about household debt trends, potential risks from retail loan penetration, and government measures to monitor and mitigate overleverage. It also discusses steps to ensure sustainable credit growth and studies on consumption, demand, and economic growth.
Key Points / Main Content:
Household Financial Status:
* Household financial liabilities increased by 5.5 percentage points from March 2020 to March 2024.
* Household financial assets increased by 20.7 percentage points during the same period.
* The net financial position of households (assets minus liabilities) has improved as of 2023-24.
Retail Loan Penetration and Asset Quality:
* Retail loan penetration increased moderately from 30.94% in March 2024 to 31.48% in March 2025.
* Year-on-year growth in retail loans has moderated from 17.61% in March 2024 to 14.05% in March 2025.
* The asset quality in the retail loan segment is largely stable, with a Gross Non-Performing Assets ratio of 1.18% as of March 2025.
* Unsecured retail loans constitute a relatively low share at 25% of retail loans and 8.3% of aggregate gross advances.
* Net household financial savings increased from ₹13.3 lakh crore in 2022-23 to ₹15.5 lakh crore in 2023-24.
Government and RBI Measures:
* RBI enhanced risk weights on select segments of consumer credit and bank lending to NBFCs in November 2023.
* Loan growth CAGR in the unsecured retail loans segment has fallen from 27.0% (September 2021-23) to 11.6% (September 2023-March 2025).
* Easing of interest rates and liquidity is expected to bolster growth and reduce households’ debt service burden.
* New income tax exemption for annual incomes up to ₹12.75 lakh is expected to increase disposable income for the middle class.
Economic Monitoring and Surveys:
* The NSO, MoSPI, conducts the Household Consumption Expenditure Survey (HCES) at regular intervals. The latest HCES was conducted during August 2023-July 2024.
* The Ministry of Finance publishes the Economic Survey annually, providing updates on macroeconomic trends and economic growth.
Impact Analysis:
Households:
* Impact: Households are affected by changes in debt levels, interest rates, disposable income, and the availability of credit. The government is aiming to ensure sustainable credit growth without compromising their financial health.
* Action Required: Households should manage their debt responsibly and take advantage of increased disposable income due to tax exemptions.
Banks and NBFCs:
* Impact: Banks and NBFCs are impacted by the RBI's enhanced risk weights on consumer credit and lending practices.
* Action Required: Banks and NBFCs need to adhere to the revised risk weights and lending guidelines set by the RBI.
Reserve Bank of India (RBI):
* Impact: The RBI is responsible for monitoring retail loan penetration, asset quality, and overall financial stability.
* Action Required: The RBI should continue to monitor the financial system and implement measures to mitigate risks associated with household debt and retail lending.
National Statistics Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI):
* Impact: The NSO is responsible for conducting the Household Consumption Expenditure Survey (HCES) to understand consumption patterns and expenditure demand of households.
* Action Required: The NSO should continue to conduct regular HCES surveys to provide data for policy formulation.
Ministry of Finance:
* Impact: The Ministry of Finance is responsible for formulating economic policies, publishing the Economic Survey, and ensuring sustainable economic growth.
* Action Required: The Ministry of Finance should continue to focus on policies that promote income growth, employment generation, and infrastructure creation.
Key Entities Referenced
Reserve Bank of India: Central bank of India, responsible for regulating the banking system and monetary policy. Referred to in the context of household financial assets and liabilities, retail loans, and financial stability.
Nirmala Sitharaman: The Finance Minister who answered the question in the Lok Sabha.
Ms Sayani Ghosh: Member of Parliament who raised the starred question regarding household debt in the Lok Sabha.
National Statistics Office: An office under the Ministry of Statistics and Programme Implementation (MoSPI) responsible for collecting and publishing various statistics, including data on household financial savings.
Ministry of Statistics and Programme Implementation: The Ministry responsible for statistical data collection and dissemination, including household financial savings data through the NSO.
Financial Stability Report June 2025: A report published by the Reserve Bank of India (RBI) that assesses the stability of the financial system. Mentioned in the context of household balance sheets and risk weights on consumer credit.
Non-Banking Financial Companies: Financial institutions that provide banking services without meeting the legal definition of a bank. Referred to in context of RBI enhancing risk weights on bank lending to NBFCs.
Household Consumption Expenditure Survey: A survey conducted by the National Statistics Office (NSO), Ministry of Statistics and Programme Implementation (MoSPI) to understand consumption patterns and expenditure of households.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF ECONOMIC AFFAIRS
LOK SABHA
STARRED QUESTION No. *312
TO BE ANSWERED ON 11 AUGUST 2025/ SRAVANA 20, 1947 (SAKA)
INCREASE IN HOUSEHOLD DEBT
*312. Ms Sayani Ghosh:
Will the Minister of FINANCE be pleased to state:
(a) whether the Government is aware of the reported increase in household debt, if so, the
details thereof;
(b) the details of household debt trends during the last five years, including year-wise breakup
of household financial assets and liabilities as a percentage of GDP;
(c) whether the Government has assessed the potential risks arising from increasing retail loan
penetration and declining net household financial savings, if so, the details thereof;
(d) the steps being taken by the Government to monitor and mitigate the risk of household
over-leverage;
(e) whether any specific measures are being considered to ensure sustainable credit growth
without compromising the financial health of households, if so, the details thereof; and
(f) whether the Government has any plans to conduct studies on the overall consumption,
demand and economic growth, if so, the details thereof?
ANSWER
THE FINANCE MINISTER
(SMT. NIRMALA SITHARAMAN)
(a) to (f): A statement is laid on the Table of the House.STATEMENT REFERRED TO IN REPLY TO THE LOK SABHA STARRED
QUESTION NO. *312, RAISED BY MS SAYANI GHOSH FOR 11th AUGUST, 2025 ON
INCREASE IN HOUSEHOLD DEBT
(a) and (b): The year-wise details of the latest available data on the stock of household financial
assets and liabilities as a percentage of GDP are given below:
Table 1: Stock of Household Financial Assets and Liabilities (as per cent of GDP)
March-20 March-21 March-22 March-23 March-24
Financial Assets 85.5 115.2 107.8 103.5 106.2
Financial Liabilities 34.7 39.1 36.5 38 40.2
Source: Reserve Bank of India (RBI)
The stock of household financial liabilities has increased by about 5.5 percentage points from
March 2020 to March 2024, while the stock of household financial assets has increased by 20.7
percentage points during the same period. Thus, the net financial position of the households
(stock of assets minus stock of liabilities) has improved as of 2023-24.
(c): As per information received from the Reserve Bank of India (RBI), the penetration of retail
loans of banks (retail loans as a per cent of gross loans and advances after adjusting for the
merger of a non-bank with a bank) has increased moderately from 30.94% in March 2024 to
31.48% in March 2025. However, the pace of year-on-year growth in the retail loans has
moderated from 17.61% in March 2024 to 14.05% in March 2025. The asset quality in the
retail loan segment of scheduled commercial banks is largely stable, with a Gross Non-
Performing Assets ratio of 1.18 per cent as of March 2025. Further, the share of unsecured
retail loans is relatively low at 25 per cent of the retail loans and 8.3 per cent of aggregate gross
advances. Moreover, as per the latest data published by the National Statistics Office (NSO),
Ministry of Statistics and Programme Implementation (MoSPI), the net household financial
savings have increased from ₹13.3 lakh crore in 2022-23 to ₹15.5 lakh crore in 2023-24.
Therefore, it is not likely to be of systemic concern to the asset quality of Indian banks.(d) and (e): As per the Financial Stability Report (June 2025) published by the RBI, the share
of prime and above-rated borrowers is growing, both in terms of the outstanding amount and
number of borrowers. This indicates resilient household balance sheets at an aggregate level.
However, considering the strong growth observed in the retail loan segment, from a regulatory
perspective, RBI enhanced the risk weights on select segments of consumer credit and bank
lending to Non-Banking Financial Companies (NBFCs) in November 2023, as a prudential
measure to strengthen the resilience of the financial system. Consequently, the loan growth
(CAGR) in the unsecured retail loans segment has fallen from 27.0 per cent between September
2021-23 to 11.6 per cent between September 2023 - March 2025. Additionally, the ongoing
easing of interest rates and liquidity is expected to bolster growth and reduce households’ debt
service burden. The new income tax exemption for annual incomes up to ₹12 -12.75 lakh is
expected to increase disposable income for the middle class, which can help these households
manage debt better. Above all, the government’s focus on ease of doing business, skilling,
employment generation, and infrastructure creation is fostering income growth.
(f): The NSO, MoSPI conducts the Household Consumption Expenditure Survey (HCES) at
regular intervals to understand consumption patterns and expenditure/demand of households.
The latest HCES was conducted during August 2023 - July 2024. Further, the Ministry of
Finance publishes the Economic Survey, which provides an annual update on the
macroeconomic trends and economic growth.
***