Borrowing with confidence: How south India’s debt signals prosperity, not peril

By: Team India Tracker

Households in Andhra Pradesh, Telangana, Kerala, and Tamil Nadu carry far more debt than the national average, reflecting stronger incomes, better banking access, and financial maturity rather than distress.

When it comes to personal debt, south India stands apart. Households in the region are far more likely to owe money than those elsewhere in the country. But economists say this isn’t a sign of distress—it’s a marker of economic confidence.

A government study published in the Statistics Ministry’s biannual journal Sarvekshana shows that more than two in five people in Andhra Pradesh (43.7 per cent) are indebted — the highest in India. Telangana follows at 37.2 per cent, Kerala at 29.9 per cent, Tamil Nadu at 29.4 per cent, Puducherry at 28.3 per cent, and Karnataka at 23.2 per cent. Together, these six southern regions dominate the country’s household debt map.

At the national level, roughly 15 per cent of Indian adults had outstanding loans in 2021, based on the National Statistics Office’s Multiple Indicator Survey (2020–21). The study defines an indebted person as anyone aged 15 or above who owed at least Rs 500 to a bank, cooperative, or informal lender at the time of the survey.

Debt as sign of financial depth

The pattern seems counterintuitive: wealthier households owe more. But economists say it’s a natural outcome of rising prosperity and access to finance. People in southern India tend to have higher incomes, more assets, and better access to banks and credit. That combination has led to greater household borrowing and higher debt levels.

The South also hosts some of the country’s most developed banking networks. Credit-to-deposit ratios are among the highest in the country, meaning more deposited funds are recycled as loans. This reflects both banks’ comfort in lending and borrowers’ confidence in repayment.

Borrowing isn’t always about survival. It often supports aspirations—education loans, small business financing, vehicle purchases, and home improvements. Examining the reasons for borrowing could explain why southern households carry higher debt.

Who borrows and why

The study finds a direct link between indebtedness and economic status: richer households are more likely to borrow. Family size matters too—smaller families carry more debt, perhaps reflecting better planning and credit management.

Gender and marital status also play a role. Married men from higher-income households show the highest indebtedness. By occupation, the self-employed, salaried workers, and casual labourers are the most indebted, while students, the unemployed, and persons with disabilities borrow the least.

These trends show that borrowing is increasingly embedded in daily life. Debt is no longer confined to poverty or agrarian stress; it extends to consumption, investment, and entrepreneurship.

Uneven debt geography

Regional contrasts are stark. Delhi recorded the lowest indebtedness at 3.4 per cent, followed by Chhattisgarh (6.5 per cent), Assam (7.1 per cent), Gujarat (7.2 per cent), Jharkhand (7.5 per cent), West Bengal (8.5 per cent), and Haryana (8.9 per cent).

The rural-urban gap is now narrow—15 per cent of rural residents were indebted, compared with 14 per cent of urban residents—suggesting credit penetration has spread beyond cities.

By social group, indebtedness is highest among Other Backward Classes (16.6 per cent) and lowest among Scheduled Tribes (11 per cent), with minimal variation across religions.

Confidence, not crisis

Rising debt can be mistaken for financial stress. But in much of southern India, borrowing signals financial maturity—the ability to access credit, use it productively, and repay it.

These states boast financially aware households, active banks, and strong repayment histories. Rising debt here reflects prosperity and access, not fragility.

As incomes rise and banking deepens, borrowing is becoming a mainstream part of financial life—much as it did decades ago in developed economies. The focus should be on borrowing wisely and sustainably.

As India expands credit access nationwide, the South may offer a glimpse of the future—more people borrowing, but with the ability to repay. Debt, in this sense, is not a burden; it is a sign of confidence spreading across the economy.