India’s Silent EMI Squeeze: How Easy Credit Is Pushing Families Into A Debt Trapt

For a growing number of Indian households, salary day no longer signals comfort or planning. It signals anxiety. The moment income is credited, EMIs, credit card bills and loan app deductions begin draining bank accounts. By the time the dust settles, there is often barely enough left for groceries, school fees or medical needs.

This is not a story of reckless consumption. It is about how easy access to credit, once meant to smooth emergencies, has slowly turned into a financial chokehold. A nationwide survey conducted by debt resolution firm 

Expert Panel between June and December 2025 among 10,000 distressed borrowers shows just how deep this pressure has become. According to findings reported by Mint and BusinessWorld, 85 percent of distressed borrowers are now spending more than 40 percent of their monthly income on EMIs (Mint, December 2025.

For borrowers earning between Rs 35,000 and Rs 65,000 a month, the situation is even more alarming. The same survey shows their EMI obligations range from Rs 28,000 to Rs 52,000, leaving little room for essentials. At these levels, household budgeting stops being a choice and becomes an exercise in survival. This is how the Debt crisis in India is quietly embedding itself into everyday life.

Borrowing To Survive, Not To Grow

When EMIs swallow most of the income, families turn to coping mechanisms that only worsen their position. The survey reveals that 40 percent of distressed borrowers are rotating credit cards to manage daily expenses, while 22 percent depend on friends, relatives or informal lenders for support. Many take fresh loans to repay old ones, creating a debt spiral that typically offers relief for only two to six months before the burden becomes heavier.

This trend has also caught the attention of regulators. The RBI’s Financial Stability Report, June 2025, Issue No. 32, available on the RBI website under Publications → Financial Stability Reports, warned about rising stress in unsecured personal loans, credit cards and digital lending. The central bank noted that household leverage is increasing at a pace that could hurt both consumption and financial stability if left unchecked.

EMI Burden Across Income Groups

Cutting Essentials To Keep Paying EMIs

The most visible impact of this stress is what families are forced to give up. According to the same Expert Panel survey, 65 percent of borrowers have cut essential spending, including children’s education, medical treatment, insurance and even food budgets (Mint, December 2025).

The measures do not stop there. Sixteen percent have taken salary advances, while 15 percent have been forced to liquidate assets, including selling gold, redeeming investments and, in some cases, selling property. 

Once savings and assets are exhausted, households are left with no cushion for the next emergency, turning short-term stress into a long-term structural problem. This is the second face of the Debt crisis in India, one that is less visible but far more damaging.

How Distressed Borrowers Are Coping With Debt Pressure

When Payments Slip, Harassment Begins

As repayment capacity weakens, borrowers face another layer of stress in the form of recovery pressure. An India Today report based on the same survey shows that 72 percent of distressed borrowers have faced harassment from recovery agents, while 67 percent receive abusive collection calls (India Today, November 2025: .

Many borrowers reported receiving between 50 and over 100 calls every month, often outside permitted hours, including early mornings and late evenings. Thirty-nine percent said they receive multiple calls every day from the same lender, while 70 percent get threatening SMS or WhatsApp messages. In more severe cases, 11 percent reported home or workplace visits, and 8 percent said they were threatened with legal action.

A Warning From Policy Makers

The RBI has already flagged these trends as a risk to the broader financial system. In the Financial Stability Report, June 2025 (Issue 32), the central bank pointed out that the rapid growth of unsecured lending could amplify stress if economic conditions soften or job markets weaken.

Consumer groups and economists have also warned that the aggressive push of instant loan apps and easy credit products is pulling financially fragile households into long-term distress rather than helping them build resilience.

Several personal finance experts quoted by The Economic Times have even cautioned against the “normalisation of EMIs” in daily life, arguing that treating borrowing as a lifestyle choice is deepening the Debt crisis in India (Economic Times, July 2025:

Conclusion 

As LoansJagat recently noted in its analysis on repayment behaviour, the only sustainable way out of this cycle is disciplined borrowing and early intervention before debt becomes unmanageable.

For now, however, for millions of families, easy credit has stopped being a convenience. It has become a quiet, monthly crisis.