Consumer indebtedness rose to 80 percent of gross domestic product (GDP) at the end of 2012, an increase of 20 percent over the last five years, according to RBS.
"The debt servicing ratio or the proportion of household income used for interest and debt repayments is close to 44 percent. This poses a headwind to growth and high risk of financial stress if interest rates rise," Sanjay Mathur, chief Asia economist at RBS wrote in a report called 'The case for a weaker ringgit' this week.
Despite the headwinds, Barclays believes the potential capital flight risk by foreign investors from government debt has been largely priced into the ringgit moves.
(Read more: Malaysia stocks hits record high after elections)
"We expect further ringgit depreciation in the near term, as investors remain focused on the potential for bond outflows. Further ahead, the ringgit is likely to be supported by Malaysia's robust domestic growth, large current account surplus and manageable short-term external debt," the bank said in a recent report.
Malaysia's current account surplus fell to 2.6 billion ringgit ($785 million) in the second quarter from 8.7 billion ringgit in the first three months, as a result of plunging exports and robust imports.
Barclays expects the currency to appreciate to 3.25 against the U.S. dollar over the next three months, from 3.31 currently.
—By CNBC's Ansuya Harjani; Follow her on Twitter