Floating Home Loan Risk: ISB Professor’s Warning

If you have a floating-rate home loan in India, an expert is urging you to consider the potential for financial distress. Prasanna Tantri, an Associate Professor of Finance at the Indian School of Business (ISB), highlights the often-underestimated risk of rising Equated Monthly Installments (EMIs).

Professor Tantri points out that borrowers in India typically carry the burden of interest-rate and refinancing risks. This approach differs from the US housing market, where fixed-rate mortgages are more common, shifting this financial risk to lenders instead of individual homeowners.

Understanding Your Interest Rate Risk

Many Indian borrowers don’t fully anticipate how much their EMIs can jump when interest rates fluctuate. This lack of foresight can unfortunately lead to significant financial strain down the line if not planned for.

Key Numbers on Household Debt

• India’s household-sector debt reached 45.5% of GDP by September 2025.
• This marks a notable increase from its level in March 2025, according to the RBI’s Financial Stability Report from June.
• Non-housing retail loans were largely responsible for this rise in overall debt.

Despite the growing debt, the RBI also indicated an improvement in borrower profiles, with a higher proportion of prime and above-rated individuals. However, the underlying risk for floating-rate loan holders remains a concern.

Why Lending Reform Matters

To better protect households from this kind of interest rate volatility, Professor Tantri advocates for a significant reform in India’s current lending framework. He believes this change is essential to prevent ‘affordable today’ from turning into ‘distress tomorrow’ for many borrowers like you.

While borrower profiles show improvement with more prime-rated individuals, the rising household debt underscores the need for greater financial protection for you, the borrower, against unforeseen rate hikes.