India’s Subprime Bubble Grew 2,100%. Now a Bust Looms
Multiple lenders are chasing the same borrowers amid stagnant incomes at the bottom of the pyramid.
Multiple lenders are chasing the same borrowers in India.
Photographer: Adeel Halim/Bloomberg
Subprime loans in India are teetering on the edge of a fresh crisis, with surveys showing signs of distress among 68% of borrowers. Those who have provided the capital for a multiyear 2,100% expansion will have to stomach losses. The $45 billion industry will probably muddle through its latest difficulties, though analysts want the central bank to come up with more robust supervision.
It’s hard to disagree with that assessment. True financial inclusion has to mean more than a bubble — followed by a bust. The share of loans overdue for between 91 and 180 days has jumped to 3.3%, from a post-pandemic low of 0.8% in June 2023. There’s more pain ahead. With 27% of borrowers taking out new loans to service old ones, and some families driven to more extreme coping strategies, such as pulling children out of school, the industry is bracing itself for higher defaults.