Gen Z Is Borrowing Differently: What’s Changing In India’s Credit Market?

India’s credit economy is undergoing a generational shift: young consumers are entering the formal borrowing system earlier, and increasingly using credit to fund consumption, travel and lifestyle expenses rather than only traditional assets such as homes and vehicles.

Paisabazaar’s analysis of credit behavior among more than 10 million consumers, reported in May, found that the average age of first credit adoption has fallen sharply across generations.

Consumers born in the 1960s typically took their first credit product at around 47, generally a home loan. For those born in the 1990s, the entry point has moved to around 25-28, often through credit cards, personal loans or consumer durable loans.

For the post-2000 generation, the first credit experience is beginning even earlier, at around 22, with small-ticket loans and Buy Now, Pay Later (BNPL) products emerging as common entry routes, Business Standard reported citing Paisabazaar.

TransUnion CIBIL’s latest research, released in July, points to the same trend. As of March 2026, half of new-to-credit-card consumers were Gen Z, defined by the bureau as those aged 30 or below. The share has risen from 43% in March 2022.

Why Lenders Are Chasing Gen Z

For lenders, younger consumers represent a large and increasingly active pool of potential borrowers.

India had 5.2 crore credit card consumers by March 2026, up 3.6 times from 2016, while outstanding card balances increased 8.3 times to ₹3.1 lakh crore, as per the TransUnion CIBIL report.

Importantly, young borrowers are not necessarily entering the financial system through credit cards alone. The report found that 31% of Gen Z consumers taking their first card in 2024 already had at least two other open credit accounts. Nearly 69% opened another credit product within a year of getting their first card.

"Many new cardholders are still early in their formal credit journey, but a growing share is entering the card market with prior credit experience and with other credit products already present in the wallet. This is especially visible among Gen Z consumers, who are adding products sooner and showing stronger engagement with their first card issuer," said Bhavesh Jain, MD & CEO, TransUnion CIBIL.

He added that for lenders, the opportunity is not just to acquire the customer at the point of first card issuance, rather it is to earn trust, remain relevant as the customer’s credit needs evolve and build a relationship that supports access to credit while maintaining discipline across the lifecycle.

The Rise Of Unsecured Consumer Credit

The shift towards younger borrowers is occurring alongside a broader change in household borrowing. Non-housing retail loans accounted for 58.4% of household borrowings in March 2026, compared with 54.9% a year earlier, according to the Finance Ministry data cited by The Indian Express.

Within personal borrowing, other personal loans outstanding rose to ₹17.32 lakh crore in March 2026 from ₹9.02 lakh crore in March 2022, as per the Parliament data submitted on Monday.

Gold loans also expanded sharply over the period, although these are secured against an asset.

Unsecured retail loans remain a particular area of concern. The gross NPA ratio rose to 1.7% by March 2026, according to the Reserve Bank of India’s Financial Stability Report. For secured retail loans, the GNPA stood at 0.7%.

How Fintechs Changed Access To Borrowing

Digital lending has lowered the barriers to obtaining small-ticket credit. Fintech companies have become particularly prominent in loans below ₹50,000, where they accounted for a 56.8% market share after credit expanded 41.6%, as per The Express report.

Data showed that 70.5% of fintech loan books were unsecured, with about half of those loans going to borrowers below 35.

Paisabazaar’s analysis found that BNPL and app-based small loans are introducing younger consumers to formal credit before they might otherwise have taken a conventional loan.

Why Discretionary Consumption Matters

The concern is not simply that young Indians are borrowing, but what they are borrowing for. Travel, concerts and other experiences are increasingly being financed through credit.

Economists estimated that music concerts over the previous 24 months could have generated spending of ₹1,600-2,000 crore, with a significant proportion of attendees belonging to Gen Z, as per the Express report.

Airbnb’s January 2026 research also found that 62% of respondents planned to travel around concerts or music festivals during the year.

Muthoot Finance data showed that more than 25% of personal loans taken in India during the first half of 2025 were for travel.

This is part of a wider move from saving first and spending later towards using credit to bring forward discretionary consumption.

What RBI Is Worried About

The RBI’s concern is less about the existence of household credit and more about the pace, composition and repayment capacity of borrowers.

In its latest Financial Stability Report, the central bank said household debt accumulation, particularly among lower-rated borrowers, requires “close monitoring”.

It warned that asset-quality risks could rise if weaker economic conditions affect borrower cash flows.

The problem is more pronounced among younger consumers. The share of over-leveraged consumers increased from 5% in FY17 to 18% in FY24 before easing to 15% in FY26, with younger borrowers accounting for a growing share of the credit-active population, according to TransUnion CIBIL.

Is Credit-Led Consumption Sustainable?

India’s expanding formal credit market is not inherently unhealthy. Greater access to regulated credit can improve financial inclusion and help consumers smooth spending or fund productive needs.

The risk emerges when multiple small loans, credit cards and BNPL obligations accumulate faster than income. TransUnion CIBIL found that 25% of new-to-credit-card consumers already had three or more open credit products when they entered the card market.

For banks and fintech lenders, therefore, the next phase of growth may depend less on simply acquiring younger customers and more on determining how much credit they can safely carry.

For regulators, the challenge is to ensure that easier access to borrowing does not turn India’s young and increasingly credit-active consumer into an over-leveraged one.