Borrowing today isn’t just about covering a cash shortfall; it’s become a deliberate part of financial planning. People take loans for many reasons: to buy a home or vehicle, to invest in a business, or simply to enjoy aspirational purchases without liquidating investments.
Increasingly, borrowers weigh the opportunity cost of selling long-term investments against the cost of borrowing. Many prefer to keep investments that have performed well over the past four to five years and instead borrow at rates they believe are lower than the returns they’d forgo by selling. In these cases, borrowing is a strategic choice, not a last resort.
India’s credit growth is spreading beyond big cities
India has seen strong credit growth with roughly 14-16% in recent years, and that expansion isn’t limited to big cities. Rural and semi-urban areas are driving much of the momentum. Loans across lending product categories such as gold loans, home loans, and vehicle financing have increased. This has also resulted in higher ticket sizes reflecting both inflation and rising incomes and aspirations.
While secured lending still makes up a large share of the lending portfolio, unsecured credit has grown rapidly, fuelled by digital lending platforms, quick access, and improved merchant acceptance, even for purchases as small as ₹5,000. Convenience and speed have shifted borrowing behaviour, bringing many who once relied on informal credit into the formal financial system.
However, India’s credit penetration and household debt-to-GDP ratio are still well below those of many developed economies. Millions of first-time borrowers join the formal system every year, but a large untapped opportunity remains.
Demographics play in India’s favour: a young population, with Gen Z and soon Gen Alpha reaching credit age, means demand will only grow. That makes financial education crucial, especially for young first borrowers to understand credit terms and costs.
This is not only important for their finances but also for the stability of the wider economy. The BFSI sector is already sophisticated in its data and digital infrastructure, but it must continue to innovate to serve a more diverse and evolving customer base.
The next frontier of credit
The last decade has transformed India’s credit landscape. Digital platforms, wider infrastructure, and formalisation have made credit faster and more accessible. Today, millions use formal credit for home loans, personal loans, business finance, BNPL, and embedded services, for both household and business needs. But the next frontier isn’t those already well-covered by data; it’s the segments that are structurally harder to assess.
Rural borrowers are one example. Their incomes are increasingly connected to the formal system, but they’re often seasonal or multi-sourced, tied to agriculture or local businesses. Self-employed people, freelancers, contract workers and gig workers often earn consistently but lack typical pay slips or long-term contracts.
Their income looks fragmented on paper, even when it’s reliable in practice. Women entrepreneurs also represent a critical opportunity, since more women are starting businesses and making financial decisions, but limited asset ownership, shorter credit histories, or smaller business scales can limit access.
And MSMEs remain a huge source of potential: they drive jobs and output, but many operate with minimal documentation or limited formal records, making them hard to underwrite with traditional models.
Making credit more inclusive
The industry is tackling this in three ways: by strengthening digital infrastructure and building collaborative platforms, second, by designing products for salaried, self-employed, gig workers, and MSMEs and finally, by investing in financial literacy, teaching people their rights, the costs of borrowing, and the options available so they can choose wisely. Banks, NBFCs, fintechs, Account Aggregators, credit bureaus, regulators, and tech firms are working together to broaden inclusion while maintaining responsible lending.
If we sustain this momentum with strong risk management, smart regulation, and emphasis on consumer protection, India can build one of the world’s most inclusive and resilient credit systems. That foundation won’t just deepen financial inclusion; it can help power India’s rise as a major economic force.
Technology has already broadened participation. The next chapter should focus on the segments whose economic contributions exceed their financial visibility. Meaningful inclusion will come from a better understanding and the responsible service of these harder-to-assess groups.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute financial, legal, or professional advice. While every effort has been made to ensure accuracy, readers should verify details independently and consult relevant professionals before making financial decisions. The views expressed are based on current industry trends and regulatory frameworks, which may change over time. Neither the author nor the publisher is responsible for any decisions based on this content.
Sachin Seth, Regional Managing Director, CRIF India & South Asia