The rise of India’s permanent EMI generation: Why debt has become a way of life

For many people today, a life free of EMIs is becoming the exception rather than the rule. Debt is no longer limited to purchasing a home or a car; it has become a regular part of the monthly budget. This is why many experts believe India is moving towards becoming a “permanent EMI generation”.

The way we borrow has changed completely

Until a few years ago, most people took out loans only when buying a house or a car, or when funds were needed for their children’s education. A loan was considered a major financial responsibility, so the decision to take one was made after careful deliberation.

Today, the picture has changed completely.

Now, mobile phones, laptops, TVs, furniture, air conditioners, vacations, and even clothes and shoes bought online are available on EMI. Even credit card bills can be converted into EMIs with just a few clicks.

Arjun Guha Thakurta, Executive Director, Anand Rathi Wealth Limited, says India is gradually becoming a permanent EMI generation. As he puts it: “The biggest change over the last decade is not just that people are borrowing more, but that almost everything can now be bought on EMI. Earlier, loans were largely restricted to buying long term assets such as a home or a car through banks. Today, consumers can purchase a mobile phone, electronic gadgets, furniture, holidays and even lifestyle products like shoes on EMI.”

He adds: “As credit has become important factor into everyday spending, EMIs have shifted from being an occasional financial commitment to a permanent part of monthly household budgets. While this has improved access to credit, it has also normalised borrowing for consumption, which makes financial discipline more important among Indian households.”

The data tells the story of this shift

This change is evident not only in people’s habits but is also clearly reflected in the data.

According to the Reserve Bank of India‘s latest Financial Stability Report, household debt climbed to 45.5% of GDP as of September 2025, driven largely by a rise in non-housing retail loans, which now make up 58.4% of total household borrowings. Home loans, by comparison, account for only about 29% of the total.

This shows that people are increasingly borrowing for expenses other than major assets like homes, compared to the past.

Separately, research by CAFRAL shows that household net financial savings have dropped to around 5-6% of GDP, even as liabilities have surged. The report notes that after the pandemic, as spending increased, people relied more on borrowing to meet their needs.

Borrowing has become easier than ever

The primary reason attributed to this shift is the availability of easy and rapid credit.

A few years ago, obtaining a loan required a visit to the bank. It involved submitting multiple documents, and approval could take several days. During this interim, people had time to reflect on whether they truly needed the loan.

Today, the entire process is completed within minutes on a mobile phone.

Services like ‘Buy Now Pay Later,’ instant personal loans, and digital lending platforms have made borrowing far easier than before. Thakurta explains: “Today, borrowing for purchasing a car or taking a personal loan no longer feels like borrowing. A decade ago, taking a loan involved visiting a bank, submitting documents and waiting for approval, which naturally gave people time to evaluate whether they really needed the credit. Today, digital lending, Buy Now Pay Later and instant credit have compressed that entire process into a few minutes on a smartphone.”

Credit is now seamlessly integrated into online shopping, travel bookings and even everyday purchases, making it almost invisible, says Thakurta, adding that however, investors should make sure that the easy access to credit does not replace disciplined saving and investing.

In essence, while the loan application process used to offer people a chance to reconsider their decision, loans are now available in minutes. This has made purchasing easier, yet people often fail to consider whether they actually need the item for which they are committing to an EMI plan.

Why is the trend of relying on EMIs increasing?

Easy credit is a major reason for this shift, but it is not the only one. Thakurta says rising aspirations, inflation, and changing attitudes toward debt have also played a significant role: “The biggest driver has been the easy availability of credit. Whether it is a credit card or instant EMIs, borrowing has become faster and more convenient than ever before. At the same time, aspirations have risen significantly, driven in large part by social media, where consumers are constantly exposed to new lifestyles and spending trends. Inflation has also played a role by putting pressure on household budgets, making credit an attractive way to maintain living standards without an immediate cash outflow.”

He adds: “A generation ago, taking a loan was a carefully considered financial decision and, in many cases, even discouraged. Today, debt is viewed as a normal part of personal finance because people focus more on the affordable monthly EMI than the total cost of the purchase.”

This is why EMIs are no longer limited to just big purchases. They are becoming a part of everyday expenses and lifestyle.

Are people now borrowing more for lifestyle than for assets?

Until a few years ago, most people took loans for things like housing, education, or business. Such loans were considered investments for the future because they created assets or increased earning potential.

But now the picture is changing. Thakurta puts a number to this shift: “Traditionally, debt was used to acquire assets such as a home or to enhance future earning potential through education or business investments. Today, more than 55% of household debt comprises non housing retail loans and home loans account for only about 29%. This shows that individuals are using borrowing to fund consumption rather than asset creation.”

However, he also clarifies that not all debt is wrong.

“This is not necessarily a concern if a borrowing is backed by strong repayment capacity, but it becomes risky when lifestyle aspirations are financed through debt without a corresponding increase in income or savings.”

That is, if your income is increasing, savings are also accumulating, and EMIs are being paid easily, then debt is not a problem. But if you are continuously taking loans to meet your growing lifestyle and your savings are lagging behind, this can create financial pressure in the future. As Thakurta puts it: “Over time, unnecessary and excess reduces financial resilience, limits the ability to save and invest and makes households more vulnerable to unexpected financial shocks.”

That is why experts recommend that investments should also increase as income increases. In his words: “A healthy balance sheet is built by ensuring debt creates long term value rather than short term satisfaction. At the same time, your savings and investments should grow in proportion to your income. For example, if income increases by 15%, investment contributions should also ideally increase by 15% to steadily build long term wealth.”

This advice is also important because if every additional rupee of income goes only towards new EMIs, the pace of wealth creation may slow down in the long run.

When can multiple EMIs become a risk?

How many EMIs are appropriate at once? There is no set answer. For some, two EMIs can be easily managed, while for others, even one EMI can be overwhelming. The real question is not the number of EMIs, but how much of your monthly income is going toward repaying loans each month.

Adhil Shetty, CEO, BankBazaar, says that banks and other lenders typically look at the Fixed Obligation to Income Ratio (FOIR). This means how much of your income is already going toward EMIs and other fixed liabilities.

“There isn’t a fixed number of EMIs that’s considered risky. What matters is how much of your monthly income is already committed before you’ve paid for essentials or set aside money for savings. While lenders may be comfortable with a fixed obligation to income ratio (FOIR) of 40% to 50%, borrowers are better off keeping total
EMIs within 40% of their take home pay.”

He says that simply being able to pay EMIs is not enough. The real test is whether, even after paying EMIs, you still have the capacity to save, invest, and handle unexpected expenses without borrowing again.

“The real test is simple: After paying your EMIs, are you still able to save regularly and handle an unexpected expense without borrowing again? If the answer is no, your debt burden is probably too high.”

That is, if a large portion of your monthly salary goes toward EMIs and you have to borrow again in case of a medical emergency or job loss, it is a sign that your debt burden may be exceeding your capacity.

Young people are falling into debt more quickly than ever before

Until a few years ago, saving was the first priority after starting a job. Today, for many young people, their first salary is accompanied by their first credit card, their first mobile phone on EMI, and sometimes even their first personal loan.

Shetty says there is nothing wrong with this in itself. Responsible borrowing helps build a good credit history. But the problem begins when EMIs become a permanent part of life before investing becomes a habit.

“Credit is reaching young professionals much earlier than before. A first job today is often followed quickly by a credit card, a phone bought on EMI, or a small personal loan. There’s nothing inherently wrong with that. Responsible borrowing helps build a credit history.”

But he also warns that if the early years of a career are spent constantly paying EMIs, the effects can be long-term.

“The problem is when EMIs become a permanent part of monthly finances before investing becomes a habit. Your twenties are the most valuable years for compounding. If those years are spent servicing discretionary debt instead of building investments, the long-term cost can be significant. A loan may get repaid in a few years, but the time lost for compounding is much harder to make up.”

That is, the loan may be repaid in a few years, but the delay in starting investments is not easy to make up for later. The biggest benefit of compounding comes with time, and if that time is spent on EMIs, the pace of building future wealth may slow down.

Where does the impact of continuous EMI payments hit the hardest?

The impact of EMIs is not limited to just the monthly budget; it gradually begins to affect savings, investments, and retirement planning as well.

People often think they will clear their existing loans first and then start an SIP or invest for retirement. However, in many cases, that does not happen; one EMI ends, and another takes its place.

“The biggest impact isn’t that people stop building wealth, but that they start building it much later. EMIs are fixed commitments, so they naturally take priority over things like emergency savings or retirement planning, which don’t have an immediate deadline.”

In other words, priorities like retirement or emergency funds often get postponed because they lack a fixed deadline. EMIs, on the other hand, must be paid on time every month.

“Over time, one loan gets replaced by another and people keep telling themselves they’ll start investing once the last EMI is over. In many cases, that day never really arrives.”

This is the phase where many people unknowingly fall into a cycle of living from one EMI to the next. A new loan is taken for every new need, while the start of investments keeps getting deferred.

“Borrowing should help you create assets or improve your financial position, not leave you with little room to save for the future.”

Are easy loans encouraging people to borrow more?

Over the past few years, banks, NBFCs, and fintech companies have made obtaining loans significantly easier than before. Personal loans are available in minutes, pre-approved credit cards are readily offered, and EMI options pop up instantly during online shopping.

But does this mean lenders are handing out excessive credit?

Shetty believes the picture is not quite that simple. According to him, technology has also improved the loan-granting process compared to the past.

“It’s a combination of both. Technology has made credit assessment much better than it was a decade ago. Lenders today have access to richer bureau data, digital underwriting and better tools to assess repayment capacity.”

He points out that the RBI has also noted in recent years that the share of borrowers with better credit profiles has increased. In other words, lending decisions are now more data-driven than before.

However, it is also true that access to credit has become much easier than ever before.

“The RBI’s latest Financial Stability Report shows that non-housing retail loans now account for 58.4% of household borrowings, while household debt has risen to 45.5% of GDP. Easier access to credit is a positive development, but borrowers should remember that being eligible for a loan is not the same as being able to afford
it comfortably over the long term.”

Simply because a bank or fintech company is willing to grant you a loan does not mean the loan is right for your financial situation. Before taking a loan, it is crucial to consider how the EMI will impact your savings, investments, and other essential expenses over the coming years.

Conclusion: Debt is not bad, but its role is changing

Debt taken to buy a home, pursue education, or start a business can help build assets and increase income in the long run. Not all loans can be viewed negatively.
However, a significant shift has occurred in recent years. Debt is no longer just a means to fulfill major aspirations; it is becoming an integral part of daily life and lifestyle.

Easy credit, digital lending, and changing consumer mindsets have made it easier for people to borrow. Yet this brings the added responsibility of ensuring that EMIs do not overwhelm your income.

Ultimately, the question is not simply about how many EMIs you have. It is whether, after paying those EMIs, you still have room to save, invest, and build a solid financial foundation for the future. If the answer is yes, debt can be a useful financial tool. If every new need is met simply by taking on another EMI, it may be time to re-examine your financial balance.

Disclaimer: This article is for informational and educational purposes only and should not be considered financial, investment or credit advice. The views expressed by the experts quoted are their own. Data and statistics are based on publicly available reports and sources, including the Reserve Bank of India (RBI), CAFRAL and industry reports available at the time of writing.

The article discusses broader trends in household borrowing and changing consumer behaviour. It should not be interpreted as suggesting that all loans or EMIs are harmful. Whether taking a loan is appropriate depends on an individual’s income, repayment capacity, financial goals and overall financial situation. Readers should carefully assess the total cost of borrowing and their ability to repay before taking any loan and, if needed, seek advice from a qualified financial adviser.

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