Arman Financial Services Ltd

I’ve heard similar stories from a friend working at a fintech startup. Companies are aware that borrowers already have multiple loans, yet they continue to issue new ones. Customers often use these new loans to pay off old ones.

Many private banks have also warned that farm loan defaults may increase in the future, as the rural economy is in distress.

Over the past five years, people have taken on a significant amount of personal loans, with financial liabilities growing at a 22% CAGR, while household savings are only growing at 11%.

This is why the Reserve Bank of India (RBI) wants to slow down personal credit growth. It is reflected in the latest figures, where personal credit growth has decreased from 20.4% to 17.7%.