Borrowing among Indians up 44%! Household liabilities at decade high

Rising EMIs and shrinking savings is the new reality for Indian households. While India’s overall savings rate continues to hover around 30% of GDP, the share of money actually available for investment is shrinking. Net financial savings have fallen sharply to about 5.2% of GDP in FY2024, down from nearly 7.7% in the pre-pandemic years, as rising borrowings eat into household surpluses.At the heart of this shift is a surge in debt, according to a new white paper titled The New Indian Household Balance Sheet by Client Associates (CA).  “While gross financial savings remain broadly stable, net financial savings have declined as household liabilities increased sharply. The reallocation toward physical assets has coincided with higher borrowing, reducing the share of investible financial surplus flowing into the formal financial system,” noted the paper.  Household financial liabilities have climbed to 6.2% of GDP, a decade high, driven by rapid growth in home loans, personal credit, and credit card spending. In fact, borrowing has expanded at a pace far exceeding savings in recent years, signalling a fundamental change in how Indians manage money. 

This is not just about higher EMIs. 

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Indian households are increasingly using credit not just for emergencies, but for lifestyle upgrades, asset creation, and consumption. At the same time, a larger share of savings is moving into physical assets like real estate, further tightening the pool of liquid financial savings.

CA is a multi-family office, managing over $7 billion in assets for more than 1300 high-net-worth and ultra-high-net-worth individuals. The paper shows that while India remains a high-saving economy, how households save, invest, and borrow is changing rapidly.

Post-pandemic data shows a decisive tilt towards physical assets. The share of physical savings—largely real estate—has risen to 70% of total household savings in FY2024, up from ~58–60% in the pre-pandemic years. At the same time, net financial savings have sharply declined to 28%, reflecting a growing preference for tangible assets over traditional financial instruments.

This shift is closely linked to a surge in household borrowing.

Household financial liabilities have increased to 6.2% of GDP in FY2024, compared to a pre-pandemic average of around 4.1%, compressing net financial savings to 5.2% of GDP from 7.7% earlier. 

In fact, household borrowing has grown at a striking 44.6% CAGR in the post-pandemic period, significantly outpacing the growth in savings.

Personal and retail lending has expanded at a 17.6% compound annual growth rate from FY2016 to FY2025, nearly twice the rate of nominal GDP expansion. Credit cards showed the strongest growth at 25.2% CAGR, with other personal loans following at 20.1%.

Housing Loans: Still the dominant category at 51.0% of total retail credit, though its share has dipped slightly from 53.6% in FY2016 

Credit Cards: The fastest-growing segment, nearly doubling its share from 2.7% to 4.8% 

 Other Personal Loans: Expanded significantly to represent 26.3% (up from 21.2%) of the portfolio

Credit cards saw the fastest growth — a CAGR of 25.2% between FY2016 and FY2025 , followed by other personal loans. 

A key driver of this expansion is the rise of unsecured debt. Powered by fintech innovations like “Buy Now, Pay Later”/

Flows into equities and mutual funds have more than tripled since FY2020, with their share in financial assets rising from 4% to 15%, even as overall penetration remains low. As of FY2024, mutual fund AUM stands at 18.2% of GDP, while demat account penetration is still just 11% of the population, highlighting the early stage of capital market participation.

Together, these trends point to a fundamental transition:

Indian households are no longer just savers—they are becoming investors and borrowers at the same time.

Key findings of the Whitepaper

• Savings backbone intact Households provide nearly 60% of India’s total domestic savings and average close to 20% of GDP each year, making them the largest and most reliable source of domestic capital.

• Physical asset dominance: Real estate investment climbed to 12.8% of GDP in FY2024, becoming the top savings category as lower mortgage rates and increased aspirations boost home purchases.

•  Investment flows into stocks and mutual funds have increased from about 4% of financial asset flows in FY2020 to an estimated 15% in FY2025.

• Long runway for capital markets: Demat account penetration remains at only 11%, while mutual fund assets under management represent 18.2% of GDP compared to 131.7% in the US, indicating substantial room for future expansion.

• Technology as enabler: Financial technology, UPI-connected lending, AI-based credit assessment, and digital investment platforms are removing barriers and transforming how households across different income levels manage their finances.

Opportunities and risks in a more dynamic balance sheet

The study suggests that higher borrowing levels indicate growing confidence and ambition rather than financial stress. 

Younger households are comfortable combining saving, investing, and borrowing in ways  that previous generations avoided. However, the paper also cautions that increased debt levels can strain cash flow and limit financial flexibility without careful management.

Building emergency funds, maintaining disciplined debt repayment, and comprehensive financial planning are becoming increasingly important.

This transition is not just macro—it directly affects how you should think about money.

1. Real estate alone is not enough

Property may dominate wealth, but it is:

Illiquid

Concentrated

Capital-intensive

 You need financial assets for flexibility and growth.

2. Debt can build wealth—but only if used wisely

Borrowing is no longer bad—but unmanaged debt is.

 Ask:

Is your loan creating an asset or funding consumption?

Can your cash flow sustain it?

3. Financial assets are becoming essential

With rising market participation:

 Long-term wealth will increasingly depend on:

SIPs

Equity exposure

Diversified portfolios

4. Liquidity is the new safety net

As leverage rises, so does risk.

Emergency funds and liquid investments are no longer optional.

4 Behaviour will decide outcomes

The report makes a critical point:

 Wealth outcomes now depend not just on income—but on:

Discipline

Asset allocation

Risk management