Loan Defaults in India Rise to 3.6% in FY25, Credit Card NPAs Jump 28%

Loan defaults are increasing in India, especially for small-ticket loans and in rural areas. A new report by the Fintech Association for Consumer Empowerment (FACE), which the RBI recognises, shows that loans overdue by over 90 days went up to 3.6% in March 2025, compared to 3.3% a year earlier.

Defaults are higher in Tier 3 towns, among young borrowers, and for people with little credit history.

Credit Card NPAs Also Rising Fast

Not just small loans, unpaid credit card dues are also growing quickly. According to RBI data, unpaid credit card amounts increased by 28.4% to ₹6,742 crore in the 12 months ending December 2024.

As a result, gross NPAs in credit cards are now 2.3% of total dues, up from 2.06% last year. This rise comes even as more people use credit cards and digital payments.

Aggressive lending of small unsecured loans, especially in rural areas, is creating a risk of over-borrowing.

Recommendations to Tackle Defaults

• Longer repayment periods
   
• Using local data for better loan approvals
   
• Technology to improve collections
   
• Raising awareness among borrowers

RBI has already tightened rules around unsecured lending to reduce future defaults.

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Conclusion

India’s rising defaults in small loans and credit cards are a warning sign. If not managed, over-borrowing could hurt rural borrowers the most. Stronger checks, borrower education, and better lending practices will be critical to keep credit healthy and avoid deeper financial stress.

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