Credit Card Spending Tops Rs 1.5 Lakh Crore, Savings Shrink. Trouble Ahead?

India's appetite for credit is growing at a pace few would have imagined a decade ago.

Every month, Indians are spending more than Rs 1.5 lakh crore through credit cards and taking personal loans worth nearly Rs 30,000 crore. At the same time, household savings remain under pressure, raising concerns among financial experts about whether consumers are increasingly relying on debt to fund their lifestyles.

The trend is visible across income groups. From vacations and gadgets to weddings and everyday expenses, more consumers are turning to unsecured credit -- loans that are not backed by any collateral.

The numbers are staggering. India's outstanding retail loan book now stands at around Rs 60 lakh crore. Of this, nearly Rs 15 lakh crore comprises unsecured loans, including personal loans and credit card dues.

While rising credit usage often reflects confidence and stronger consumption, experts warn that the growing dependence on high-cost borrowing could expose households to financial stress if incomes fail to keep pace.

Consumption Boom or Debt-Fuelled Growth?

According to Abhishek Bhilwaria, Partner at BhilwariaFinserv, the surge in unsecured borrowing reflects a fundamental shift in how Indian households are managing money.

"The unprecedented expansion of India's unsecured retail loan portfolio, which now tracks at approximately Rs 15 lakh crore, unveils a structural realignment in the financial behaviour of the Indian household," Bhilwaria said.

He noted that monthly credit card spending consistently exceeding Rs 1.5 lakh crore suggests the economy is moving beyond post-pandemic recovery and into an era of "leverage-driven lifestyle consumption."

According to him, the shift away from traditional asset-building credit towards consumption-led borrowing is putting pressure on household balance sheets and pushing India's household debt-to-GDP ratio to around 41.3 per cent.

Harsh Grover, Co-Founder of LoansJagat, sees similar trends in the data.

Citing RBI figures, he pointed out that credit card spending rose 7 per cent year-on-year to Rs 1.97 lakh crore in April 2026, while the number of outstanding credit cards crossed 119.44 million.

At the same time, household financial savings remain subdued.

"Net household financial savings remain low at just 7 per cent of Gross National Disposable Income (GNDI) in FY25, up from 5.8 per cent in FY24," Grover said.

The pattern of borrowing is also changing. According to survey data cited by Grover, vacations account for 27 per cent of personal loans, ahead of home renovation at 24 per cent, suggesting that credit is increasingly being used for discretionary spending rather than wealth creation.

The Minimum Due Trap

Perhaps the biggest concern is not the amount people are borrowing, but how they are repaying it.

Financial planners say a growing number of cardholders pay only the minimum amount due on their monthly credit card bills. While this protects their credit score in the short term, the unpaid balance continues to attract hefty interest charges.

Depending on the lender, annual interest rates on revolving credit card balances can range from 36 per cent to as high as 60 per cent.

Piyush Jhunjhunwala, Founder and CEO of Stockify, said this trend could leave households vulnerable to a cycle of debt.

"Credit card spend is now over Rs 1.5 lakh crore per month, and personal loans are still being disbursed at high levels. This creates a higher chance for a household to depend on debt for consumption rather than for income growth," he said.

"In addition, a larger population of borrowers are only making the minimum payments due with their credit cards, which puts them at risk for interest charges averaging between 36 per cent and 60 per cent a year."

The concern is amplified by the fact that interest on unpaid credit card balances compounds rapidly, making it difficult for borrowers to clear outstanding dues.

Early Signs of Stress Emerging

The warning signals are already visible.

According to Bhilwaria, overdues in the 91-to-360-day bucket have surged 44 per cent to Rs 33,886 crore. Much of this increase is being driven by younger borrowers below the age of 35, many of whom are rolling over debt at extremely high interest rates.

He believes the issue is not yet a systemic banking risk but does point to growing stress among urban consumers.

"These rising defaults do not present an immediate threat to the structural safety of major commercial banks, but they reveal localised financial distress," Bhilwaria said.

"It suggests that a significant cross-section of urban consumers is funding everyday survival and discretionary aspirations through high-cost, short-term debt."

The Reserve Bank of India has already responded by tightening norms for unsecured lending. Bhilwaria noted that the central bank's decision to raise risk weights on unsecured banking exposures to 125 per cent was a clear signal that regulators are closely monitoring the segment.

Why Falling Savings Matter

The debt story becomes more concerning when viewed alongside India's savings trend.

According to Sarika Grover, Co-Founder of LoansJagat, the combination of rising unsecured borrowing and weak household savings could create vulnerabilities for families during economic shocks.

"Unsecured retail loans account for 53.1 per cent of total retail loan slippages across scheduled commercial banks," she said, citing RBI's Financial Stability Report.

She added that nearly half of personal loan and credit card borrowers also have a home loan or vehicle loan. "This creates a situation where a default on a smaller loan can also lead to NPA classification on larger loans," Grover said.

The risk is compounded by elevated credit card interest rates, which typically range between 36 per cent and 48 per cent annually on unpaid balances.

Jhunjhunwala said rising leverage combined with declining savings weakens a household's ability to absorb financial shocks such as job losses, medical emergencies or unexpected expenses.

"While India's household debt-to-GDP ratio remains lower than many developed economies, the pace of growth in unsecured credit deserves close scrutiny," he said.

How Much Debt Is Too Much?

Experts agree that borrowing itself is not the problem. The issue arises when debt starts consuming a large share of monthly income.

A commonly accepted thumb rule is that total EMIs should not exceed 50% of monthly income. Many financial planners prefer an even stricter limit of 30-40 per cent.

Jhunjhunwala advises consumers to use credit primarily for income-generating or wealth-building purposes rather than day-to-day consumption.

"Credit should generally not exceed 30-40 per cent of your monthly income. People should avoid relying on high-cost unsecured loans for routine living expenses," he said.

Maintaining repayment discipline, building emergency savings and keeping debt levels manageable remain critical to long-term financial health.