85% of distressed borrowers forced to pay over 40% of their income towards EMIs: Survey

Buy now, pay later (BNPL), instant loan apps, and personal loan EMIs are emerging as a significant source of loan distress among Indians, with 85% of distressed borrowers reporting EMI burdens exceeding 40% of their monthly income.

This survey, conducted by the Expert Panel between June and December 2025, was carried out among 10,000 financially distressed borrowers across India, yielding many shocking revelations. The survey reveals critical insights into the financial challenges, loan management strategies, and recovery prospects of borrowers facing significant repayment difficulties. The findings indicate systemic vulnerabilities in India's credit ecosystem and an urgent need for structured debt relief mechanisms.

EMI to income ratio

According to the report, a significant imbalance has been created in the distribution of the EMI-to-Income ratio in India, as distressed borrowers reported borrowing far beyond their ability to repay with their current incomes. This has been further highlighted in the report, which shows that financially stressed individuals with an average monthly income of ₹35,000 to ₹65,000 have an average EMI obligation of between ₹28,000 and ₹52,000.

This imbalance in the EMI to earnings ratio is adding significant financial stress on Indian families, the impact of which becomes evident in the welfare of the family members.

This has resulted in the borrowers having insufficient funds for basic expenses like food, utilities, transportation, forcing them to credit card rotation (40%), additional loans, friends & family support (22%), along with informal lending.

The impact seldom stops here. According to the report, a considerable 65% of borrowers surveyed have also reduced their essential spending, including stopping children’s education, deferring medical treatment, cancelling insurance policies, cutting food/nutrition budget, and others.

Salary advances

Meanwhile, 16% borrowers have resorted to salary draws and advances, while 15% have been forced into asset liquidation, by selling gold/jewellery (8%), property sale (2%), and stock / mutual fund redemption (5%).

While these strategies provide temporary relief of 2-6 months, they undoubtedly contribute to accelerating long-term financial deterioration with additional interest burdens and reduced future capacity. As a result, non-repayment has increased, leading to borrowers facing recovery agency harassment.

A considerable 72% of the borrowers surveyed report some form of harassment from recovery agencies, while 67% have reported receiving frequent calls, often abusive, from lenders. The impact does not end here, as 11% report home or workplace visits by collection agents, while 8% report threats of legal action.

The Expert Panel survey reveals that average calls per borrower stand between 50-100+ every month, which are often not aligned with RBI-regulated times, and come at early morning (6-8 AM) and late evening (8-10 PM). Furthermore, 39% of the borrowers report that they receive multiple calls every day from the same lender, while 70% reveal they receive SMS or WhatsApp threats and warnings.

Harassment

The loan recovery harassment seldom stops at this point, as it often leads to physical harassment as well. The report reveals that 11% of the distressed borrowers witness home visits, while 18% individuals say their family members have received threats from the recovery agents.

Furthermore, 22% of the borrowers have reported that recovery agents have contacted their parents and other references, while 12% say the agents have damaged their reputation by involving their workplace or employers. This draws a grim picture of the state of loan recovery harassment in India, which often leads borrowers to take unfortunate decisions.

The threats, public shaming, and psychological pressure become the primary contributing factors for personal and professional distress and damage.

“Loan recovery harassment in India is often counterproductive, and borrowers often manage it with call avoidance, changing phone numbers, or fleeing their residence — none of which leads to resolution for the borrowers. The loan recovery harassment by recovery agents often remains illegal, but as per the report, borrowers demonstrate limited awareness of regulatory protections such as Fair Practice Code, Banking Ombudsman redressal and Debt Recovery Tribunal procedures making them vulnerable to predatory practices.” says Mr. Anurag Mehra, Director of Expert Pane

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