Buy Now, Regret Later–The Rise of Consumer Debt in India
16 May 2025 6:20 AM IST
A lot of Indians grow up with an anti-debt and anti-credit card mentality. But, the data shows that’s changing now.
In 2018, credit card spending in the country was at 4.6 lakh crore rupees. In the last quarter of the recent financial year, that figure grew by four times, and is now at 21.2 lakh crore rupees.
Credit feels easy, but sometimes, we fail to read the fine print. A lot of Indians are also finding themselves in a never-ending debt trap.
How does that work? What can you, as a consumer do to protect yourself?
NOTE: A machine transcribed this episode. A human has looked at this text but there might still be errors. Please refer to the audio above, if you need to clarify something. If you want to give us feedback, please write to us at [email protected].
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TRANSCRIPT:
Kudrat (Host): In February of this year, Arun–whose name we’ve changed to protect his privacy–finally became debt-free. Arun is a 37-year-old techie with two kids. He spent 1.5 lakh rupees on his credit card in 2019. But, paying that back took him six years in total. That’s because after missed repayments he accumulated over two lakhs in interest on the loan.
Though Arun is now debt free, his close friend, who is in his mid 30s, has over five lakh rupees in credit card dues. He also has non-mortgage loans exceeding over 35 lakh rupees. His monthly EMI right now is 2 lakhs–the same as his salary.
It’s so easy to get credit in India now. In 2018, credit card spending in the country was 4.6 lakh crore rupees. In the last quarter of the recent financial year, that figure was at 21.2 lakh crore rupees. Meaning that number grew four time–with a CAGR of almost 24%.
It’s not just credit cards either. A lot of e-commerce websites–amazon, nykaa, myntra–have a ‘Buy Now, Pay Later’ and ‘No-Cost EMI’ options. Buyers think they’re getting a good deal. But they don’t read the fine print, and sometimes find themselves in never-ending debt-trap.
Kudrat (Host): My name is Kudrat Wadhwa and you’re listening to The Signal Daily. We don’t do hot takes. Instead, we’ll bring you deep dives into the ‘how’ and ‘why’ of consumer trends.
In this episode, I’ll speak to Salman about his story on what’s behind India’s credit card spending surge? To what extent are people defaulting? What can you, as a consumer, do to protect yourself from falling into a debt-trap?
Kudrat: So you published a story for the core about how about India's increasing credit card spending search and how so many people are defaulting on unsecured loans. This story can be found on our website. So my first question is pretty simple, you know, so what inspired you to pursue the story? Do you have friends who've kind of gotten stuck in this debt trap or, um, was it something else? So, um.
Salman: The reason I picked up this idea, uh, was because of Instagram and YouTube ads, especially because if you notice these, uh, ads from fintechs b npls banks and n BFCs, they usually show up at the end of the month or starting of the month, usually targeting salaried employees Now, um. Before this, I, uh, there was, there weren't a lot of these ads coming up, popping up, but I think there's been an influx of these ads, um, almost, uh, across all social media platforms. And when I inquired among other users, I found the same, uh, pattern of BNPL companies and, you know, fintechs and even banks running personal loan. And um, um, and. Vehicle loan and other kinds of loan ads.
Kudrat: Also you interviewed Mr. Jain who said that Fintechs are largely responsible for the huge increase in credit in India, uh, in the past three years. And he also said that it's because of these new age lenders who are very aggressive and often give out loans to first, first time creditors who are not ready for that. So my question is, what does it mean to be credit ready?
Salman: So when it comes to credit ready, how banks define that has been changing for a while. For example, um, before all the BNPL wave and before all this wave of VMI products packaged through UPI, uh. People usually get their EMI spending on credit cards. And credit cards are only given at a minimum, uh, of 30,000 a month.
So you will not get a credit card if you're not making at least 3000 a month in, in salary. Right. Or at least somewhere close to the thousand a month in your salary. Yeah. So you are not gonna get a credit card without that limit in your salary.
So a few years, I mean, this is 2013, 14, when. Credit cards were the only option.
So post thousand 15, we have seen products like Simple Lazy Pay, uh, and many others as products who model their product, where they offered loans of only 5,000, 10,000 a month, calling it by now, pay later, right? And, uh, so this is a li a a little bit minimal limit, right? These are of course, marketed towards people who are very new to credit.
Now what happens with that is, um. You start using BNPL as a person with, even if you're earning say 10,000, 15,000, and you still use like a 5,000 rupe credit, which is fine, it sounds great. But what these apps do also at the same time is that they also have access to your spending data. Where do you spend it on how much you spend on.
They also have access to your bank statements and emails and SMS right through the app. The app actually reads your SMS and your emails as well. So over time they understand you as a better borrower and they build a credit score, alternative credit scoring, uh, and they give you more and more limit as this goes on.
Right. Okay. So this has been happening since, like for, for the last 10, 12 years. Yeah, so those other, so the explanation about who's credit ready is different for a bank, different for an NBFC, different for a vehicle loan provider, different for A-B-N-P-L and different for a credit card provider. So that explanation has changed so.
Kudrat: another kind of common idea of credit out there is that, you know, people right now, especially young people, have this sort of YOLO attitude and, you know, they want to live beyond their means and their salaries, and they think more short term versus long term, which is why they end up, you know, signing up for some of these apps or getting things on credit and so on.
So what I was wondering is in your reporting, did you find that to be the case that you know, people who got trapped in this dead trap, that they were being careless?
Salman: see, uh, young people aspire to spend more than what they earn. Not just because of, you know, um, because they feel like they can, uh, they want to have expensive products.
It's also because they've been marketed these products specifically through Instagram and other social media and. They, it's not that they are unaware of the risks they are at the at, but at the same time there is aggressive marketing push in ad spends by fintechs and banks. Mm. And uh, it's not really, I wouldn't, but still there should be basic education from banks.
For example, when I was a fresher out of college, when I got my first bank account and I asked her credit card, uh, the bank refused. But, uh, six to eight months later, they did come back and give me a credit card of, uh, 20 of 30,000 limit. Uh, but at the same time they did. Kind of have some kind of classes and some kind of advisory coming to my email and on SMS on how to repay and how not to repay.
That is you have to, if you are using a credit card, always keep it within 30% of the limit do not overspend. And even if you're using Credit Personal Limit, you have to pay it every month. You cannot just be half or the minimum amount. And they did have a entire, uh, book booklet explaining, um. What are the differences between being, you know, a low amount and high amount, how the interest compounds?
So this education came the moment you bought a credit card, but right now everything is online, right? Mm-hmm. You're not really going to the bank to get it where you are getting integrated by a salesman there, because that is his responsibility to tell you this. Yeah. Right. So now that bit has changed because BNP credit card and UPI, different offerings means you have to manually open and read it.
Right. So banks are not taking that responsibility anymore. It's, it's is also, it's also on the consumer side right now. Yeah. So, so yes, more and more youngsters and not just youngsters.
I'm also noticed a lot of boomers are also stuck in credit cycle, uh, debt cycle actually.
Kudrat: Salman says that it’s not just young people but also older people, who get stuck in the debt trap right now. The way this works is that people only pay the minimum amount they’re supposed to each month, rather than the full amount. They also don’t realize that they have to pay interest too, which the lender then calculates as compound interest.
Scary, right? I reached out to a financial expert – Mr. Arvind Datta, a banker who now runs his own wealth management firm. He told me best practices, about how to use credit cards.
Arvind Datta: first of all, like, uh, you should not be like, uh, overspending. To that extent that you are not able to make the entire payment when your billing cycle ends or your payment cycle approaches. Uh, but most people get carried away because they feel that they got a plastic with a credit limit. Mm-hmm.
And, uh, they can spend endlessly. Uh, later on they realized that probably they spend more than they would, they could, would've afforded if they would have cash, they would've, uh, used cash in the bank. So that's, that's one. Secondly, what happens is that I would also blame, uh, to a certain extent banks and credit card companies to a certain extent, because if the customer's behavior repayment behavior has been good, yeah.
After six months, after nine months, after one year, they start to give you credit limit increases. Yeah. They will start to, uh, give you a, send you SMSs with a link to click and accept that credit limit increase. So what happens is that most of the time people, without realizing the repercussions or the downside impact of it, they tend to sign up for those increased limits and then they go overboard on spending.
Mm. Okay. So large ticket purchases. If you are booking a airline ticket or you are buying a, let's say a, a television, uh, you can avail those, uh, finance schemes, 0% schemes that we have. Yeah. But one should be aware that I should not go overboard with my spending habits. Mm. That's what one has to be mindful of.
Okay. Got it. Got it. So pay your credit card, uh, debt on time and not go overboard.
Kudrat (Host): As Indians, a lot of us grow up with an anti-debt/anti-credit card mentality. As our country is modernizing, we’re now wanting more from the world, even if our salaries don’t necessarily support that. Credit is really easily available too, with so many of these new fintechs and schemes in the market.
As more of us take out credit cards and loans, let’s also learn about the best practices for doing so. The responsibility is on us now.
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