(Bloomberg) -- India’s household debt likely surged to a record in the final three months of last year, with signs that consumers are boosting riskier borrowing that’s been a worry for the central bank.

Household debt touched a new high of 39.1% of gross domestic product in the October-December quarter, up from 36.7% a year ago, estimated economists Nikhil Gupta and Tanisha Ladha of Motilal Oswal Financial Services Ltd in a report earlier this week. The figures are higher than the previous peak of 38.6% in the Jan-March period of 2021.

Non-housing debt, which stood at 72% of the total household debt, grew at a faster clip than housing debt, indicating Indians could be taking loans to spend on consumer goods or for splurging rather than to buy physical assets. Non-housing debt increased 18.3% year-on-year, but loans taken for housing grew at 12.2%.  

About 60% of India’s economy is driven by consumption, but a rapid rise in the unsecured loan portfolio of banks has alarmed the regulator. As financial savings plummeted domestically, the Reserve Bank of India last year made it costlier for lenders to disburse unsecured loans after multiple warnings.

The regulator fears that a rising share of unsecured loans could build stress in banks’ books if they turn sour and threaten financial stability of the financial system. Bad debts also lower banks’ ability to lend toward productive needs of the economy.

“While housing debt is very low in India compared with other economies, the non-mortgage household debt is the same as in Australia and Japan, and higher than the world’s several other major nations,” the authors said. 

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