India’s middle class is facing a worsening debt crisis, with many borrowing just to survive, warns Saurabh Mukherjea, Founder and CIO of Marcellus Investment Managers. Citing RBI data, he highlights that 45% of borrowers are subprime, with nearly half of their loans used for daily expenses rather than asset creation. As personal loans and credit card debt surge, Mukherjea estimates that 5-10% of middle-class Indians are trapped in a financial spiral. He urges immediate action, warning that the crisis will deepen if left unaddressed.
India’s middle class is sinking into a worsening debt trap, with rising personal loans and credit card debt putting millions at financial risk, warns Saurabh Mukherjea, Founder and Chief Investment Officer of Marcellus Investment Managers. In a recent analysis, Mukherjea highlighted alarming trends from the Reserve Bank of India (RBI) and credit bureau data, showing that a significant portion of borrowers are struggling to meet even basic expenses.
Marcellus Investment Managers, a Mumbai-based investment firm, is known for its focus on long-term wealth creation strategies and financial market insights. Mukherjea’s warning underscores the urgent need for policy interventions to prevent a full-scale financial crisis among middle-income earners.
Debt-Fueled Survival: A Troubling Reality
According to Mukherjea, India’s middle class is increasingly borrowing not for asset-building but to sustain daily life. RBI data shows that retail and credit card loans have jumped from 4% to 11% of total banking system credit over the last decade. This sharp rise reflects a shift from borrowing for investments to borrowing for survival.
“The middle class has borrowed hand over fist,” Mukherjea explained. “Over 45% of Indian borrowers are classified as subprime, meaning they have poor creditworthiness and are at a high risk of default. Worse, nearly half of these subprime loans are being used for consumption rather than wealth creation.”
Millions Trapped in a Debt Spiral
Mukherjea estimates that between 5-10% of middle-class Indians have entered a debt spiral, taking multiple loans they are unlikely to repay fully. Data from RBI and credit bureaus indicate that:
- 67% of middle-class Indians have taken personal loans.
- 25% of borrowers hold a credit card, a personal loan, and at least one additional high-ticket loan.
- 45% of total borrowers are subprime, and half of their borrowing is just to cover daily expenses.
“When you analyze these figures, it’s evident that a large section of middle-class India is struggling with unsustainable debt,” Mukherjea warned. “Each passing year, this problem will get worse unless it is actively addressed.”
Urgent Need for Financial Counseling and Policy Changes
Mukherjea called for urgent measures to curb the debt crisis, including stricter lending regulations, increased financial literacy programs, and support for struggling borrowers. He also urged individuals facing mounting debt to seek professional financial advice before their situation deteriorates further.
“If you are a middle-class Indian struggling with debt, don’t ignore it,” he advised. “Seek financial counseling before the problem escalates beyond control.”
As India’s economy continues to evolve, the financial well-being of its middle class will be a crucial factor in sustaining growth. Without intervention, the debt burden could have long-term consequences for both individuals and the broader financial system.
