Nithin Kamath, the founder and CEO of Zerodha, has raised alarm over India’s growing borrowing habits, particularly in the segment of small-ticket personal loans and credit card borrowings. According to Kamath, aggressive marketing strategies by fintech apps have fueled this trend, with an increasing number of individuals taking loans they cannot afford. Kamath highlighted a disturbing uptick in defaults, particularly in the segment of low-income borrowers, stating, “The defaults among this segment that can’t afford to take loans are starting to increase.”
Kamath referred to data from CRIF, which revealed that personal loans in India now total Rs 13.7 lakh crore. Public sector banks hold 38% of this debt, while private banks and NBFCs (Non-Banking Financial Companies) hold 33% and 24%, respectively. What has raised serious concern is the rapid rise of small-ticket loans—those under Rs 10,000—dominated by NBFCs, which now issue 94% of these loans. The share of NBFCs in new lending has risen significantly to 38.7% in FY25, compared to 33.2% the previous year.
Kamath emphasized the importance of managing personal finances and advised paying off high-interest loans, including credit cards, to avoid financial strain. He also pointed out the psychological toll of debt, explaining how being in debt can affect all aspects of life, from personal to professional.
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Among borrowers with loans ranging from Rs 10,000 to Rs 50,000, nearly 29.3% experienced a drop in their credit scores within six months of borrowing. These individuals, however, have continued to borrow more, increasing their total debt by 37.6%. Kamath also noted a surge in defaults in smaller cities, where overdue loans have risen sharply, particularly loans under Rs 10,000, with defaults over 360 days increasing from 24.5% to 39.7% in just one year.
Reflecting on his own experiences, Kamath shared, “The worst times in my life have been when I owed money for spending it on things I didn’t really need.” He concluded by urging individuals to borrow only when they are confident that the investment will yield a return greater than the cost of borrowing, underscoring the importance of financial prudence in today’s fast-paced borrowing culture.
