‘Pay off high-interest debt’: Zerodha cofounder Nithin Kamath sounds alarm over defaults

Zerodha cofounder Nithin Kamath on Wednesday cautioned against the growing borrowing in the country, specifically in the small-ticket personal loans segment and credit card borrowing.

In a post on X, Kamath said a significant reason for this is the incessant spamming by fintech companies. "...some people seem to have borrowed too much or borrowed despite not being able to afford it. A lot of these are small ticket loans under Rs 10,000 from fintech apps. I wonder how much of this is due to the incessant spam from these loan apps nudging people to take "instant pre-approved" loans," the post read.



Highlighting a surge in defaults in this segment citing data from the Centre for Research in International Finance (CRIF), Kamath said the true extent of the problem will be revealed in the coming quarters.

As of September 2024, the total outstanding personal loans in India stood at Rs 13.7 lakh crore, as per CRIF data. Of this, public sector banks hold the largest share, about 38%, followed by private banks with 33%, and non-banking financial companies (NBFCs) with around 24%.

Kamath pointed out the importance of paying off high-interest debt before delving into savings and investing. "The lowest hanging fruit and the most bang for your buck thing you can do with your personal finances is to pay off all your high-interest loans, including credit cards. If you are in debt, the psychological effects will show everywhere from your personal life to your workplace," he wrote.