Andhra Pradesh and Telangana have been flagged time and again, as these tier-3 states have the most number of borrowers. As per the Comprehensive Annual Modular Survey -2022-2023, Andhra stood as the first runner up, and Telangana came second in terms of the highest numbers of loan borrowers.

Secondly, a Times of India report also published that Telangana might get slapped with ₹1.393 crore in irrigation related loans as non-performing assets. This news surfaced in June, 2025, and the cycle continues.

A report by Fin-Tech Association for Consumer Empowerment (FACE), published in July, 2025 also noted, “Uttar Pradesh, Andhra Pradesh, and Telangana showed among the highest delinquency rates, exceeding 4%.”

In August, 2025, police reports state that the two states, Andhra Pradesh and Telangana experienced a 41% increase in harassment cases in 2024, as personal loan defaults reached a six-quarter high of 3.6%. Read this article to assess where the fault is.

More than 800% Increase in Debt Burdens in Andhra Pradesh and Telangana

Since 2014, Andhra Pradesh and Telangana have witnessed a staggering escalation in debt burdens—rising by over 800%—illustrating how much more households now depend on loans.

This surge has manifested in more severe consequences. In 2024, reported cases of harassment (linked to debt recovery) in these states climbed to 35,944, up from 25,488 in 2023—indicating the human toll of aggressive lending and recovery practices.

Loan Defaults Common Among Salaried Professionals, Entrepreneurs, and Small Businessmen: Stats by Legal Savvy

Rather than being confined to low-income stratum, loan defaults now affect salaried professionals, entrepreneurs, and small businessmen—a worrisome trend unsettling traditional perceptions.

Legal Savvy, a debt-resolution firm, has helped over 11,000 borrowers across the two states repay more than ₹270 crore through structured legal settlements since 2024. Their interventions have facilitated debt reductions of 70–85%, enabling borrowers to manage repayments more sustainably and with dignity.

Illustrative settlement cases include:

A salaried professional in Hyderabad settling a ₹1.5 crore loan at ₹37.5 lakh—a 75% reduction—through six months of legal negotiation.
A working woman resolving a ₹1 crore loan by settling at ₹27 lakh after a year-long process, with protection from harassing recovery tactics.

These insights emphasise the efficacy of legal interventions and structured settlements in offering relief amid heightened financial distress.

Fintech Personal Loan Defaults Hit Six-Quarter High: Insights from Moneylife

The digital lending landscape is equally fraught. According to a July 2025 report by Moneylife, personal loans overdue by more than 90 days reached 3.6% by March 2025, the highest in six quarters.

Below is a table summarising key figures from that report:

Category	Delinquency Rate (90+ days overdue)
Overall Fintech Segment	3.6%
Tier-3 Cities and Beyond	4.2%
Rural Areas	4.1%
Semi-Urban Locations	3.8%
Borrowers < 25 Years	6.1%
Borrowers Aged 26–35	3.6%
Credit history < 1 Year	5.3%
Credit history 1–2 Years	6.5%
Credit history > 5 Years	2.9%

These statistics underscore that the worst stress is localised in smaller towns, rural areas, and among younger or inexperienced borrowers with limited credit history. It highlights how rapid fintech expansion can expose vulnerable demographics to heightened risk.

Telangana About to Hit the RBI’s Defined Limit for NPA Classification

In late June 2025, REC Ltd, a public sector lender, warned that two Telangana irrigation-related SPVs, including Kaleshwaram’s project units, had crossed the 60-day repayment threshold, bringing them dangerously close to NPA classification under RBI norms. The outstanding sums total approximately ₹1,393 crore.

Fortunately, by mid-July, Telangana managed to avert full default by clearing the dues just before the critical deadline. Specifically, TSWRIDCL and KIPCL paid the overdue amount—₹503 crore and ₹890 crore respectively, just in time, avoiding NPA classification. However, the loans remain under SMA-2 (Special Mention Account 2) due to prior delays.

Which States Have the Highest Number of Borrowers in the Country?

According to the Comprehensive Annual Modular Survey (NSS 79th Round, 2022–23):

Andhra Pradesh ranks first, with 60,092 borrowers per 1 lakh people.
Telangana follows second, with 42,407 borrowers per 1 lakh.
Tamil Nadu comes third at 35,703 borrowers per 1 lakh.

A snapshot from this data:

State	Borrowers per 1 Lakh (2022–23)
Andhra Pradesh	60,092
Telangana	42,407
Tamil Nadu	35,703

Additionally, as of December 2024, women borrowers in Andhra Pradesh constituted nearly 41% of active loan accounts, far surpassing the national average of 31%. Over five years, AP has seen a compound annual growth rate of 13% in women borrowers, indicating a notable shift in financial inclusion trends.

Conclusion

The financial ecosystem in Andhra Pradesh and Telangana is at a critical juncture. Debt burdens have skyrocketed in recent years, touching demographic groups previously considered financially stable, such as salaried professionals and business owners.

Digital lending, while democratising credit access, has also elevated risks—with delinquency rates soaring in non-metro areas and among younger, less experienced borrowers. Meanwhile, state-backed projects like Kaleshwaram narrowly avoided default, thanks to last-minute repayments, signalling persistent fiscal vulnerabilities.

To alleviate emerging crises, key strategies must include:

Strengthened legal frameworks and financial education to support struggling borrowers.
Responsible fintech lending—with tighter underwriting and borrower counseling, as urged by FACE and RBI.
Prudent state fiscal management to avoid slipping into SMA-2 or NPA status, especially for infrastructure-linked debt.

Continued monitoring, policy reforms, and inclusive yet cautious lending are essential to rein in the financial instability looming over these regions.

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