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Meta Description: More than 28 crore Indians have outstanding debt. Explore why personal loans, EMIs, credit cards and gold loans are rising and whether India’s middle class faces a growing debt trap.
India’s relationship with borrowing is changing rapidly. From smartphones and cars to holidays, education and everyday expenses, EMIs have become a normal part of household spending. What once required years of saving can now be purchased with a few clicks and a monthly repayment.
But behind this convenience lies a bigger question: is India’s growing credit culture creating financial freedom, or slowly pushing households towards a debt trap?
Official data presented in Parliament shows that around 28.3 crore live unique borrowers had outstanding debt in March 2025, with average outstanding debt of approximately ₹4.77 lakh per borrower. The government has also clarified that this figure should not be interpreted as the average debt of every Indian citizen.
India’s 28 Crore Borrowers: What Does the Number Really Mean?
The headline figure of 28 crore borrowers sounds alarming, but it needs context.
India has seen a massive expansion in access to formal credit. TransUnion CIBIL says the proportion of credit-eligible Indians who had accessed formal credit at least once increased from 35% in March 2017 to 74% in March 2026. The share of credit-active consumers also increased from 11% to 28% during the same period.
This expansion is not necessarily bad news.
Loans can help families purchase homes, fund education, buy vehicles or support businesses. The problem begins when borrowing is increasingly used to finance consumption that cannot comfortably be supported by household income.
That is where India’s growing EMI culture deserves closer attention.
Why Are Indians Taking More Loans?
One major reason is simple: credit has become easier to access.
Banks, NBFCs and digital lenders can now process applications much faster than in the past. Credit scores, digital KYC and online banking have made borrowing far more convenient.
At the same time, e-commerce platforms and retailers aggressively promote No-Cost EMI, Buy Now Pay Later and Zero-Down-Payment offers.
The psychological impact is powerful.
A ₹60,000 purchase can feel expensive when viewed as one payment. But when the same purchase is advertised as ₹5,000 per month, the immediate pain appears much smaller.
The product has not become cheaper. The payment has simply been divided into smaller pieces.
This is one reason EMI culture can quietly encourage consumers to spend more than they otherwise would.
Personal Loans Are Becoming a Major Part of the Credit Story
Personal loans have become one of the most important components of India's retail credit market.
According to government data, personal-loan credit stood at around ₹69.4 lakh crore in March 2026, compared with approximately ₹34.7 lakh crore in March 2022.
RBI data also showed personal loans growing strongly in 2026. The government reported that personal loans grew 16.2% during FY2025-26, supported by demand for vehicles, gold-backed borrowing and housing-related credit.
More borrowing can be a sign of economic confidence. But rapid growth in consumer credit also means household finances become increasingly connected to interest rates, employment conditions and monthly cash flow.
Gold Loans Are Rising Sharply Too
Another striking development is the rapid expansion of loans against gold jewellery.
Government data shows outstanding loans against gold jewellery rising from around ₹74,738 crore in March 2022 to ₹4.61 lakh crore in March 2026.
That represents a more than fivefold increase over four years.
TransUnion CIBIL has also reported a major increase in gold-loan origination, with origination value doubling year-on-year in the December 2025 quarter, helped by higher gold prices.
Gold loans can provide a useful source of liquidity, particularly for small businesses and households facing temporary cash-flow problems. But borrowers need to remember one crucial point: the gold is security for the loan.
If repayments fail and the loan is not resolved according to the lender's terms, pledged jewellery can ultimately be at risk.
The Hidden Psychology of “No-Cost EMI”
The phrase “No-Cost EMI” has become a powerful marketing tool.
Consumers often interpret it as meaning they are borrowing for free. In reality, the overall economics can involve discounts, merchant arrangements, processing fees or other conditions.
The bigger psychological issue is that an EMI separates the pleasure of buying from the pain of paying.
You enjoy the new phone today.
You pay for it over the next 12 months.
Then another offer appears.
Then another EMI begins.
Eventually, a household can have several small monthly commitments that individually appear manageable but collectively consume a significant share of disposable income.
This is how an EMI habit can gradually become a financial burden.
Young Borrowers Are Driving the New Credit Economy
India's younger population is increasingly participating in formal credit.
TransUnion CIBIL reported that first-time borrowers increased in the December 2025 quarter, while personal-loan originations among first-time borrowers rose 20% year-on-year. Consumer-durable loans increased 22%. Borrowers below 35 accounted for 58% of the first-time-borrower segment.
This reflects a major generational change.
For younger Indians, credit cards, personal loans and consumer finance are no longer unusual financial products. They are becoming part of everyday life.
That can be positive when credit is used responsibly.
But it also means financial literacy is becoming more important than ever.
Is India Really Heading Towards a Debt Trap?
The answer is not necessarily.
India's household debt situation should not be portrayed as an imminent national financial crisis simply because the number of borrowers is rising.
The government has pointed out that India's household debt remains manageable compared with several peer emerging economies. It also noted that a large share of borrowers have strong credit scores and that household financial assets have increased as a percentage of GDP.
So the real issue is not simply how many people borrow.
The more important questions are:
How much are they borrowing?
Why are they borrowing?
Can they comfortably repay it?
What happens if their income suddenly falls?
Those questions tell us much more about whether India's EMI culture is healthy or dangerous.
When Does an EMI Become a Debt Trap?
An EMI becomes risky when a household starts borrowing to repay previous borrowing.
Using a credit card to pay another bill, taking a personal loan to clear multiple EMIs or repeatedly using BNPL for essential expenses can create a dangerous cycle.
The warning signs are usually simple:
- You depend on credit for routine household expenses.
- Your EMIs consume a large portion of your monthly income.
- You regularly pay only the minimum amount on credit cards.
- You take a new loan to repay an old one.
- Your savings are falling while your outstanding debt is rising.
- A small unexpected expense forces you to borrow again.
If several of these signs appear together, the problem may be bigger than simply having “too many EMIs”.
The Bigger Picture for India’s Middle Class
India's expanding credit market is neither entirely good nor entirely bad.
Credit can help people build homes, buy vehicles, start businesses and manage temporary financial emergencies. It can also support consumption and economic growth.
But easy credit can become dangerous when borrowing grows faster than income.
The latest data presents a more nuanced picture. Formal credit access has expanded dramatically, personal loans remain a major part of retail borrowing, and gold-backed lending has surged. At the same time, India's household financial position remains considerably more resilient than the simple “debt crisis” headline might suggest.
The real challenge for India's middle class is therefore not to avoid every loan.
It is to understand the difference between productive debt and lifestyle debt.
A loan that helps create an asset, expand a business or improve earning potential can potentially strengthen household finances.
A pile of EMIs used to maintain a lifestyle beyond one's income can do exactly the opposite.
Final Word
India's 28 crore borrowers are a sign of a rapidly expanding formal credit economy, not proof that 28 crore Indians are trapped in debt.
But the rise of personal loans, credit cards, BNPL and easy EMIs deserves attention.
Because debt rarely becomes a problem overnight.
It usually begins with one small EMI.
Then another.
And another.
Until the monthly salary arrives—and most of it has already been promised to someone else.
The real question is no longer whether India is becoming a credit-driven economy. It is whether Indian households can ensure that credit remains a tool for building wealth rather than a trap that consumes it.
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