New Delhi: India’s rapid expansion in retail lending is beginning to reveal signs of strain, with a growing number of borrowers reporting repayment stress and aggressive recovery practices. A recent survey highlights how easy access to credit is increasingly being matched by financial pressure and vulnerability.

According to findings by fintech advisory firm Expert Panel, nearly 39% of borrowers reported facing abusive recovery calls, while 28% said they received frequent calls from multiple lenders—pointing to rising stress levels in the system.

Recovery pressure becoming more aggressive

The survey indicates that recovery efforts are intensifying once borrowers miss payments.

• 11% reported visits by recovery agents at home or workplace


• 8% faced threats of legal or police action


• Many borrowers experienced repeated calls and follow-ups

These patterns suggest that recovery practices, especially in unsecured lending, are becoming more persistent—and in some cases, crossing acceptable boundaries.

The Reserve Bank of India (RBI) has already issued guidelines against coercive recovery methods, but complaints continue to surface.

Why borrowers are struggling

The reasons behind repayment stress reveal deeper financial vulnerabilities:

• 31% cited job loss or salary cuts


• 28% pointed to high EMIs relative to income


• 19% said they were juggling multiple loans

Other triggers include medical emergencies, family expenses and business losses.

These factors highlight a key shift—borrowers are not defaulting due to overspending alone, but often due to income instability and lack of financial buffers.

Shift from asset creation to survival borrowing

One of the most striking trends is how credit is being used.

• 26% borrowed for medical emergencies


• 22% for personal or family needs (education, weddings)


• 18% for business or income disruptions


• A smaller share used loans for daily expenses or to repay existing EMIs

Only about 9% of borrowers used credit for asset creation such as housing or vehicles.

This indicates a move away from long-term wealth-building loans towards short-term, consumption-driven borrowing.

Rising household debt adds to concerns

The RBI has flagged broader systemic risks, particularly in unsecured retail lending segments like personal loans and credit cards.

India’s household debt has now crossed 40% of GDP, with a growing share coming from non-housing loans. This shift suggests increasing reliance on credit for everyday needs rather than investment.

The central bank has already responded by tightening norms and increasing risk weights for certain categories of loans.

Stress not yet visible in bad loan data

Interestingly, the stress is not fully reflected in traditional banking indicators.

Gross non-performing assets (NPAs) remain near multi-year lows, indicating strong bank balance sheets. However, early warning signs are emerging at the borrower level:

• Missed repayments


• Rising EMI burdens


• Multiple active loans


• Increased recovery pressure

These signals often appear before they show up in system-wide data.

Expert view: Credit driven by necessity

Anurag Mehra of Expert Panel noted that borrowing patterns are changing.

He emphasised that credit is increasingly being used out of necessity rather than aspiration, underlining the need for responsible lending practices and more empathetic recovery approaches.

A system at an inflection point

India’s credit ecosystem is at a delicate stage. While increased credit access supports economic growth and financial inclusion, it also raises concerns about sustainability.

The combination of:

• Rising unsecured lending


• Higher household debt


• Borrower-level stress

suggests that the system may be approaching an inflection point.

Conclusion

India’s credit boom is no longer just a growth story—it is also becoming a stress story. While the broader financial system appears stable, early warning signs are emerging at the ground level.

How lenders, regulators and borrowers respond to these signals will determine whether the current credit expansion remains sustainable or turns into a larger financial concern.