India Credit Growth 2025 Rising Defaults Threaten Loan Market Stability
India’s credit market is riding a massive wave in 2025. According to Experian’s Credit Insights, India credit growth 2025 reached an all-time high, with Assets Under Management (AUM) standing at ₹121 lakh crore as of March — a 21% jump year-on-year. On the surface, this paints a picture of a vibrant economy, full of borrowing activity and consumer confidence.
But look a little closer, and a troubling reality emerges: defaults are rising. Credit cards, personal loans, and two-wheeler loans — all key drivers of retail credit — are showing higher delinquency rates. It’s a warning signal that the boom might be building cracks.
Credit Growth Is Booming, but Trouble Lurks
India’s lending sector has seen rapid expansion over the last two years. Banks and non-banking financial companies (NBFCs) have been eager to issue loans, especially in personal finance, consumer goods, and vehicle segments.
However, the India credit growth 2025 rising defaults pattern shows that this growth is not without risks. The personal loan AUM actually fell 12% year-on-year, and credit card issuance slowed, dropping 2% compared to the previous quarter. These declines suggest that lenders are becoming cautious in certain categories.
Why Defaults Are Rising
Financial analysts point to several factors behind this shift:
- High cost of living: Inflation has made monthly budgets tighter, pushing more borrowers into missed payments.
- Aggressive lending: Many lenders extended credit to riskier customers during the boom years.
- Job market stress: Some sectors have seen layoffs and pay cuts, making debt harder to repay.
These conditions are hitting the middle-income and lower-middle-income borrowers the hardest.
Impact on Credit Cards and Personal Loans
Credit cards are often the first to show trouble when borrowers are financially strained. Missed payments lead to higher interest charges, creating a snowball effect. Personal loans — typically unsecured — are also vulnerable since they rely heavily on a borrower’s income stability.
The India credit growth 2025 rising defaults trend could lead to stricter lending criteria, higher interest rates, and more loan rejections in the coming months.
Two-Wheeler Loan Stress
Two-wheeler loans, often seen as small and low-risk, are now part of the problem. Many first-time borrowers in rural and semi-urban areas are defaulting, impacting NBFC balance sheets.
Global Context: India Not Alone
Globally, countries like the U.S. and UK are seeing similar issues — fast credit growth followed by higher defaults. This makes India’s case part of a larger trend in emerging and developed markets alike.
The Road Ahead
Economists suggest the following measures to control the India credit growth 2025 rising defaults situation:
- Tighter credit checks to avoid over-lending
- Financial literacy programs for borrowers
- Monitoring of risky loan categories like unsecured personal loans and subprime credit cards
If managed well, India’s credit boom can continue without turning into a debt crisis. If ignored, the rising defaults could snowball into a nationwide credit crunch.
