No Cause For Alarm

Slower loan growth should help lower liabilities and boost household savings

The net financial liabilities of India's households went up to ₹18.79 lakh crore in FY24 or 6.4% of gross domestic product (GDP). To be sure, this is a fairly substantial jump over the levels seen in the previous year when the liabilities were ₹15.96 lakh crore or 5.9% of GDP. An analysis by CareEdge had shown that to be the highest levels in many years and significantly higher than the pre-pandemic average of 3.4%. By that yardstick, the 6.4% of GDP for FY24 appears to be somewhat high. However, there is no reason for alarm. Given the proliferation of lenders—banks, fintechs, and non-banking financial companies—over the past decade, credit has been growing at a brisk pace in the last few years. Indeed, bank credit was growing at 15-16% before it slowed to the current levels of 11-12%. As a CRISIL analysis shows, households have been borrowing at a faster pace than they have been saving since the Covid-19 pandemic.