This lesson explains “non-financial debt” in the Indian economy. It covers the BIS borrower groups, the UPSC 2020 question and household debt figures from RBI. It also covers Treasury bills and the exam traps. Facts run to 8 October 2026.
Contents
- What non-financial debt is
- The three borrower groups
- Why UPSC's answer was "1, 2 and 3"
- What household debt is made of
- Government borrowing: Treasury bills and dated securities
- Why the classification matters
- Non-financial debt and external debt
- What RBI's recent reports show
- Exam traps and PYQ
- Five true-or-false checks
- Think-it-through questions
- Related lessons
- 7 practice MCQs
Must know: what non-financial debt is
What is non-financial debt, and where does the term come from?
Non-financial debt is the debt owed by non-financial borrowers. This lesson takes the term from a BIS data set. The data set is called credit to the non-financial sector.
The BIS says the data set captures borrowing activity by the government sector and the private non-financial sector. It covers more than 40 economies.
Which framework does the BIS follow?
The BIS says its statistics follow the framework of the System of National Accounts. Its methodology note names the System of National Accounts 2008.
What kinds of debt does the data set count?
The data set covers three kinds of instruments.
- Currency and deposits.
- Loans.
- Debt securities.
The BIS adds the three together. It calls the sum “core debt”.
How is the total split up?
Total credit to the non-financial sector is first broken down into two parts. One part is credit to the government sector. The other part is credit to the private non-financial sector.
The private part is split again. One piece is non-financial corporations. The other is households. The BIS counts non-profit institutions serving households with households.
Is India in the data?
The BIS methodology note lists India among the emerging market economies. So India is one of the economies in this data set.
Sources: BIS methodology note, BIS data portal.
Who are the three borrower groups?
The BIS splits non-financial borrowing into the government sector and the private non-financial sector. It splits the private part into non-financial corporations and households. That gives three groups at the lowest level.
What counts as a household?
The BIS portal defines the household sector in its data set. It says the sector comprises households plus non-profit institutions serving households. These are SNA sectors S.14 and S.15.
What counts as a non-financial corporation?
The BIS note says the private non-financial sector includes non-financial corporations. It says they can be private-owned or public-owned.
Where do banks fit in?
The BIS portal says total credit comes from all sources. It names domestic banks, other domestic financial corporations, non-financial corporations and non-residents.
So banks and other financial corporations appear on the lending side of this data. The data set itself records borrowing by the government and private non-financial sectors.
Can the government and private numbers be added?
The BIS note says its private-credit data set can be combined with its general government debt data set. It says the two together can give a useful picture of the aggregated indebtedness of all non-financial sectors.
Sources: BIS data portal, BIS methodology note.
Why was UPSC's answer "1, 2 and 3"?
UPSC asked this in the Civil Services Preliminary Examination 2020. It was General Studies Paper I, Set A, Question 54.
The stem asks what non-financial debt includes. It gives three items. They are housing loans owed by households, amounts outstanding on credit cards and Treasury bills. UPSC’s key for Set A gives option (d), which is “1, 2 and 3”.
How does each item fit a borrower group?
| Item in the question | Who owes the money |
|---|---|
| 1. Housing loans owed by households | Households |
| 2. Amounts outstanding on credit cards | Households |
| 3. Treasury bills | The Government of India |
Why are credit-card dues household debt?
RBI’s Financial Stability Report of June 2025 talks about household debt. It lists credit cards under non-housing retail loans. So card dues sit inside RBI’s household debt figure.
Why is a Treasury bill government debt?
RBI’s FAQ says Treasury bills are short term debt instruments issued by the Government of India. The BIS has a government sector as one of its borrower groups.
What is the rule that links all three?
Each item is owed by a household or by the government. Both are non-financial borrower groups in the BIS breakdown. So all three items count, and the answer is (d).
Sources: UPSC paper 2020, UPSC key 2020, BIS data portal, RBI FAQ, RBI FSR Jun 2025.
Good to know: household and government debt
What is household debt in India made of?
RBI’s Financial Stability Report (FSR) of June 2025 splits household debt into broad categories. The categories are housing loans, non-housing retail loans, and agriculture and business loans.
How big is each group?
- Non-housing retail loans formed 54.9 per cent of total household debt as of March 2025.
- Housing loans formed 29.0 per cent of household debt.
- Agriculture and business loans are the third category. RBI says non-housing retail loans have grown faster than these too.
What is inside “non-housing retail loans”?
RBI’s footnote lists four items. They are personal loans, credit cards, consumer durable loans and other personal loans. RBI says these loans are mostly used for consumption.
So is housing the largest group?
No. In the June 2025 report, housing loans were 29.0 per cent. Non-housing retail loans were 54.9 per cent.
What did the next report say?
RBI’s FSR of December 2025 says non-housing retail loans continue to be the dominant segment. It gives 55.3 per cent as of September 2025.
That figure is a share of total household borrowing from financial institutions. The 54.9 per cent figure is a share of total household debt. The two use different bases. Keep them as two dated readings.
What base did RBI use for household debt?
In the June 2025 analysis, RBI used consumer segment loans as a proxy for total household debt. It says they represent about 94 per cent of total household debt at end-December 2024.
Sources: RBI FSR Jun 2025, RBI FSR Dec 2025.
Which government instruments are non-financial debt?
The government sector is one of the three borrower groups. RBI’s FAQ covers short-term Treasury bills and dated securities of longer tenor.
What is a Treasury bill?
RBI’s FAQ calls Treasury bills money market instruments. It says they are short term debt instruments issued by the Government of India.
So the issuer is the Government of India. RBI announces the issue details through a press release on its website every week.
Which tenors do Treasury bills have?
RBI says they are presently issued in three tenors. The tenors are 91 day, 182 day and 364 day. The Department of Economic Affairs page is an auction calendar for 2009-10. It lists the same three bill types.
How does a Treasury bill pay the investor?
Treasury bills are zero coupon securities and pay no interest. They are issued at a discount and redeemed at the face value at maturity.
RBI gives an example. A 91 day bill of Rs 100 face value may be issued at, say, Rs 98.20. That is a discount of, say, Rs 1.80. It is redeemed at Rs 100.
The return to the investor is the face value minus the issue price.
What are cash management bills?
The Government of India introduced Cash Management Bills in 2010, in consultation with RBI. They meet temporary mismatches in the Government’s cash flow. They have the generic character of Treasury bills. They are issued for maturities of less than 91 days.
What are dated securities?
Dated G-Secs carry a fixed or floating coupon. The coupon is paid on the face value, on a half-yearly basis. RBI says the tenor generally ranges from 5 years to 40 years.
RBI’s Public Debt Office acts as the registry and depository of G-Secs.
Sources: RBI FAQ, DEA T-bill page.
Why does the classification matter?
Sorting debt by borrower helps analysts compare households, firms and governments. The BIS publishes this classification as credit statistics. RBI’s Financial Stability Reports give household debt figures.
What is the credit-to-GDP gap?
BIS Working Paper 878 was published on 12 August 2020. The authors are Mathias Drehmann and James Yetman. They define the gap as the deviation of the credit-to-GDP ratio from a long-run trend.
The paper says the gap is very useful for macroprudential policy. It adds that Basel III suggests policymakers use it in countercyclical capital buffer frameworks.
How did the BIS test the gap?
The paper compares how well different gaps work as early warning indicators for crises. It uses quarterly data from 1970 to 2017 for 41 economies.
How long are the BIS series?
The BIS portal says quarterly data on credit to the government sector cover 20 years on average. Data on credit to the private non-financial sector cover more than 45 years on average.
How does RBI report on this?
RBI publishes the Financial Stability Report twice a year. Its list page is titled Half-Yearly Financial Stability Report. The release dates on the list are 30 December 2024, 30 June 2025, 31 December 2025 and 30 June 2026.
The June 2025 report has a section on the corporate and household sectors. So RBI reports on firms and households in the same chapter.
How does this link to the BIS groups?
The BIS groups are government, non-financial corporations and households. The RBI chapter on corporates and households covers two of these groups.
Sources: BIS paper 878, BIS data portal, RBI FSR list, RBI FSR Jun 2025.
How is non-financial debt different from external debt?
The two terms ask two different questions.
What does the BIS classification ask?
It asks which sector borrowed. The answer is the government, non-financial corporations or households.
What does external debt ask?
Arthapedia defines gross external debt as outstanding current liabilities that require payment of principal or interest. They must be owed to non-residents by the residents of the economy.
Arthapedia adds that the definition includes debt incurred by both the Government and the private sector.
What is the difference in one line?
- Non-financial debt asks who borrowed.
- External debt asks whether the money is owed to non-residents.
Sources: BIS data portal, Arthapedia.
Current affairs: what RBI reports show
What do RBI's recent reports show on household debt?
RBI has put household debt in three recent reports. Each gives a dated figure as a share of GDP at current market prices.
What did the December 2024 report say?
The FSR of December 2024 gives 42.9 per cent of GDP in June 2024. RBI calls this relatively low compared to other emerging market economies.
It adds that household debt had increased over the past three years. It says the increase is driven by a growing number of borrowers rather than an increase in average indebtedness.
What did the June 2025 report say?
The FSR of June 2025 gives 41.9 per cent of GDP as on end-December 2024. It says household debt has been increasing in recent years, driven by rising borrowing from the financial sector.
It also gives debt per borrower. The per capita debt of individual borrowers grew from Rs 3.9 lakh in March 2023 to Rs 4.8 lakh in March 2025. RBI says the rise was mainly led by the higher-rated borrowers.
What did the December 2025 report say?
The FSR of December 2025 gives 41.3 per cent of GDP as at end-March 2025. It compares this with a 5-year average of 38.3 per cent.
It says India’s household debt remained lower than most peer emerging markets.
Did the ratio rise at every reading?
No. The three readings are 42.9, 41.9 and 41.3 per cent. They come from three reports and three dates.
RBI’s list also shows a report dated 30 June 2026. This lesson does not use its figures.
Sources: RBI FSR Dec 2024, RBI FSR Jun 2025, RBI FSR Dec 2025, RBI FSR list.
Exam practice: traps and PYQ
Which traps and which question matter for the exam?
What are the common traps?
- Housing as the biggest group. RBI’s June 2025 report puts housing loans at 29.0 per cent. Non-housing retail loans stood at 54.9 per cent.
- Two percentages that look alike. The 54.9 per cent and 55.3 per cent figures have different dates and different bases.
- An undated GDP ratio. RBI gave 42.9, 41.9 and 41.3 per cent at three different dates.
- The Treasury bill issuer. RBI’s FAQ says the Government of India issues Treasury bills.
- Banks. In BIS data, banks appear as lenders.
- External debt. It is defined by money owed to non-residents.
How do the two terms differ?
| Term | What it asks |
|---|---|
| Non-financial debt | Which sector borrowed. |
| External debt | Is the money owed to non-residents. |
What did UPSC ask in 2020?
UPSC Civil Services Preliminary Examination 2020, General Studies Paper I, Set A, Q54. In the context of the Indian economy, non-financial debt includes which of the following ?
1. Housing loans owed by households
2. Amounts outstanding on credit cards
3. Treasury bills
Select the correct answer using the code given below : (a) 1 only (b) 1 and 2 only (c) 3 only (d) 1, 2 and 3
UPSC’s official answer key for Set A gives option (d), 1, 2 and 3. Card 3 shows the borrower behind each item.
Sources: UPSC key 2020, UPSC paper 2020, RBI FAQ, BIS data portal, RBI FSR Jun 2025, Arthapedia.
Check your understanding
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Questions to think through
Why did UPSC list housing loans, card dues and Treasury bills together?
The stem says housing loans are owed by households. RBI lists credit cards inside household debt. RBI’s FAQ names the Government of India as the issuer of Treasury bills. All three borrowers are in the BIS non-financial groups.
Did household debt to GDP rise at every RBI reading?
No. RBI gave 42.9 per cent for June 2024, 41.9 per cent for end-December 2024 and 41.3 per cent for end-March 2025. RBI’s December 2025 report says 41.3 per cent is above the 5-year average of 38.3 per cent.
Why do 54.9 per cent and 55.3 per cent both describe non-housing retail loans?
They are two dated readings. 54.9 per cent is a share of total household debt as of March 2025. 55.3 per cent is a share of household borrowing from financial institutions as of September 2025.
What does the credit-to-GDP gap measure?
BIS Working Paper 878 defines it as the deviation of the credit-to-GDP ratio from a long-run trend. The paper says Basel III suggests policymakers use it in countercyclical capital buffer frameworks.
Native Practice
Test the borrower groups, the framework, Treasury bills and the RBI household-debt figures. Read the connected explanation after each answer.
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