Declining household savings pose risks to India's credit growth engine: Report

India's household savings are shrinking while household debt is rising, a combination that could pose risks to the country's credit growth model and long-term economic ambitions, according to Deloitte India's State of Financial Services in India 2026 report.

The report found that gross household financial savings declined from 11.3% in FY19 to 10.8% in FY25. At the same time, household financial liabilities increased from 4.1% of GDP to 4.7%, after touching a recent high of 6.2% in FY24.

Deloitte said it remains uncertain how long the downward trend in savings will continue, but stressed that policymakers, regulators and financial institutions would need to monitor the shift closely because of its implications for economic growth.

Stressed household savings

Household savings have traditionally formed the foundation of India's financial system, supplying banks with deposits that are recycled into loans for businesses and consumers. However, changing consumption and investment patterns mean that banks can no longer rely on deposits to the same extent as they have in the past, the report noted.

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Former HDFC Bank managing director Aditya Puri, who wrote the foreword to the report, said India would need more efficient debt markets to bridge the funding gap as the economy expands.

"Changing household consumption and savings patterns mean that we can no longer rely on bank deposits to the extent we have in the past to fund rising credit demand," he noted.

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Trillion economy

India is targeting a GDP of ₹2,700-2,800 lakh crore, or a $30-35 trillion economy, by 2047, which would require significantly higher investments across infrastructure, manufacturing and emerging industries. The financial system will therefore need to channel larger volumes of credit and capital more efficiently.

The report noted that credit growth has consistently outpaced deposit mobilisation, forcing banks to increasingly depend on costlier short-term market borrowings. To sustain lending growth, Deloitte has recommended deeper and more efficient debt markets, improved liquidity and stronger integration between money, bond and derivatives markets.

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The report also highlighted changing dynamics in household borrowing. Unsecured retail loans have come under scrutiny following the Reserve Bank of India's decision to raise risk weights in November 2023. According to the RBI's December 2025 Financial Stability Report, unsecured loans accounted for 53.1% of retail slippages.

At the same time, consumer borrowing patterns have shifted. A recent survey cited in the report showed that 27% of personal loan borrowers in the first half of 2025 used the funds for travel and vacations, up from 21% in 2023.

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Liquidity conditions

Liquidity conditions have also tightened after the surplus environment seen during and immediately after the Covid-19 pandemic. While the pressure eased after January 2025, underlying tightness remains in the banking system.

Deloitte argued that deepening debt markets and reducing excessive dependence on deposits would be essential to support India's next phase of growth. It called for measures such as broader participation in bond markets, better price discovery and more market-driven interest rates.

The report's findings underscore a structural shift underway in India's financial landscape. As savings behaviour changes and leverage rises, the country's traditional credit engine may need new sources of fuel to power its growth ambitions.

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