Surge in Indian Household Borrowings Post-Pandemic: Key Insights
Growth in Household Borrowings
In the aftermath of the pandemic, Indian households have experienced a remarkable increase in borrowings, registering a compound annual growth rate (CAGR) of 44.6%. This surge has notably outstripped the growth in savings. From FY2016 to FY2025, personal and retail lending has expanded at a CAGR of 17.6%, nearly double the growth rate of nominal GDP. Credit cards have seen the most significant growth, with a CAGR of 25.2%, while other personal loans have increased at 20.1%, as detailed in a recent white paper titled 'The New Indian Household Balance Sheet' by Client Associates (CA).
Currently, physical assets, predominantly real estate, account for nearly 70% of household savings, a significant rise from the pre-pandemic average of 58% during FY2016-FY2020. Concurrently, household financial debt has escalated to 6.2% of GDP in FY2024, compared to an average of around 4.1% before the pandemic, leading to a decline in net financial savings from 7.7% to 5.2% of GDP.
In terms of investments, real estate has surged to 12.8% of GDP in FY2024, emerging as the leading savings category, driven by lower mortgage rates and heightened aspirations for home ownership. The report indicates that nearly 60% of India's domestic savings average close to 20% of GDP annually. Furthermore, investment in stocks and mutual funds has risen from approximately 4% of financial asset flows in FY2020 to an estimated 15% by FY2025.
Despite gross financial savings remaining relatively stable, net financial savings have decreased due to a sharp rise in household liabilities. The shift towards physical assets has coincided with increased borrowing, which has diminished the portion of investible financial surplus entering the formal financial system. The paper also highlights that gold loans have rapidly ascended to become the second-largest retail credit product in India, reflecting a growing acceptance among borrowers, larger loan amounts, and broader participation from lenders. Notably, the borrower demographic now includes more consumers and women with extensive credit histories.
According to TransUnion CIBIL’s Gold Loan Landscape Report, gold loan balances have surged 3.8 times since March 2022, with their share in India's retail credit portfolio increasing from 5.9% to 11.1% by December 2025.