Fintech-Driven Credit Expansion and Household Debt Stress in India: A State-Level Empirical Analysis Using a Composite Household Financial Stress Index

Abstract

Purpose: This study investigates the spatial and structural determinants of household financial stress across 20 major Indian states over the period 2014–2023, a decade marked by rapid fintech-driven credit expansion, aggressive NBFC growth, and the digitization of consumer lending. The study constructs a novel Household Financial Stress Index (HFSI) as the primary outcome measure to systematically compare household financial vulnerability across Indian states and geographic regions.

Methodology: The HFSI is a composite of three normalized official secondary data indicators: the Household Debt-to-Income Ratio (HDIR), the retail Non-Performing Asset (NPA) ratio, and a Debt Service Ratio Proxy (DSRP), sourced from the Reserve Bank of India (RBI), National Sample Survey Office (NSSO), and the Ministry of Statistics and Programme Implementation (MoSPI). The analytical framework employs one-way ANOVA for state-wise and regional comparison (N = 186 state-year observations), Pearson correlation analysis, and simple OLS regression to test four formally stated hypotheses.

Findings: All four hypotheses are supported at the 0.1% significance level. State-wise ANOVA confirms significant variation in HFSI (F = 14.87, p < 0.001, η² = 0.630), with Andhra Pradesh (HFSI = 0.56) and Telangana (0.54) exhibiting the highest stress. Household debt is the strongest positive predictor of HFSI (β = 0.764, p < 0.001, R² = 0.450), while per capita income is a significant negative predictor (β = −0.00141, p < 0.001, R² = 0.389). Regional ANOVA confirms significant variation across India's five geographic regions (F = 18.43, p < 0.001), with the Southern region exhibiting the highest mean HFSI (0.482). The retail NPA ratio demonstrates robust explanatory power across all regression specifications.

Contribution: This study delivers a replicable, policy-ready HFSI monitoring framework, the first formal state-level ANOVA-based comparison of household financial stress in India, and actionable evidence for the RBI, state financial planning authorities, and digital lenders. The findings demonstrate that household financial stress is geographically concentrated rather than uniformly distributed, demanding state-specific regulatory and income policy interventions.