New Delhi, March 2 -- India's economy is growing fast. The speedometer looks impressive. The engine, however, is increasingly running on debt. The Reserve Bank of India's (RBI) Financial Stability Report published in December has a line that ought to cause senior bankers to spill their coffee: retail credit is no longer a tail risk; it has moved to the core. This is the regulatory equivalent of observing that smoke is now a structural feature of the building but evacuation might be premature.

Unsecured retail loans account for 53.1% of total retail slippages at scheduled commercial banks, even as their retail gross non-performing assets (GNPA) ratio sits at a comforting 1.8%. This is finance's oldest optical illusion: fixate on the avera...