India’s credit culture is changing rapidly. There was a time when loans were primarily taken for needs such as buying a home, pursuing higher education, or starting a business. However, digital lending platforms, fintech apps, and easier access to credit have transformed both borrowing habits and consumer behaviour. Today, young Indians are becoming part of the formal credit system much earlier than previous generations.
Recent data shows that India’s credit market is no longer limited to working professionals alone. Both Gen Z and Millennials play a significant role in driving credit growth, but their borrowing patterns and purposes differ considerably. This makes it important to understand who is taking on the most debt in India today and how the country’s credit landscape is evolving.
Millennials: India’s Largest Borrowers
According to India Today, the largest share of India’s credit market belongs to people in their 20s, 30s, and early 40s. This is typically the stage of life when individuals buy homes, purchase vehicles, take on family responsibilities, and work towards career stability. Between January and September 2025, Millennials accounted for 55.2% of new borrowing.
In terms of account ownership, Millennials held 269 out of 507 credit card accounts, 238 out of 462 vehicle loan accounts, 191 out of 425 home loan accounts, and 370 out of 662 ongoing personal loan accounts.
For Millennials, EMIs have become a normal financial tool. Unlike previous generations, who preferred to save first and spend later, Millennials are generally more comfortable spending based on expected future income. Rising urban living costs, high property prices, and aspirations for a better lifestyle have further strengthened this trend. Meanwhile, the decline in home loan interest rates from 9.5–10.5% to 7.35–8.75% between 2015 and 2025, along with lower personal and education loan rates and a reduction in the repo rate from 8% to 5.25%, has made borrowing more affordable and accessible.
Gen Z: Young, Digital, and Comfortable with Credit
While Millennials remain the largest borrowers in terms of loan value, Gen Z is the fastest-growing segment of the credit market. Despite being at the beginning of their careers and generally having lower incomes, this generation is rapidly adopting personal loans, credit cards, and small-ticket digital loans.
Experts believe that Gen Z is entering the formal credit system much earlier than previous generations, with digital platforms making it easier to build a credit history at a young age.
According to BankBazaar data, repayment stress among Gen Z borrowers is the lowest across all age groups. This generation views credit not only as a solution for emergencies but also as a tool for cash-flow management and payment convenience. Growing usage of credit for travel, gadgets, online shopping, and lifestyle expenses reflects a shift in financial behaviour. Due to their relatively strong credit discipline and digital-first approach, lenders are also increasingly willing to extend credit to this segment.
Elderly Borrowers
While younger generations are borrowing to create new assets, elderly Indians are using credit to unlock value from assets they already own. Gold loans, loans against fixed deposits, and loans against mutual fund investments are relatively more popular among this group.
Their objective is generally not to create new liabilities but to meet short-term cash requirements without selling existing assets.
According to experts, secured loans carry lower risk for lenders, which helps keep interest rates relatively low. As a result, elderly borrowers often prefer these options over costlier unsecured loans. By pledging gold, investments, or fixed deposits, they can access affordable credit while retaining ownership of their assets. This approach reflects financial maturity, prudent risk management, and long-term planning.
Warning Signs of a Debt Trap and Growing Challenges
While access to credit has increased significantly, some serious risks are also emerging. Many borrowers are now taking fresh loans to repay existing debt, which can gradually lead to a debt trap.
According to experts, financial stress begins to rise sharply when total EMI obligations exceed 40–50% of an individual’s take-home income. On average, many borrowers are carrying unsecured loans worth around Rs 5 lakh spread across three to four different lenders.
The data also highlights this growing risk. Personal loan originations have surged from 6 million after 2017 to 210 million, while the total value of these loans has increased from Rs 1.5 trillion to Rs 12 trillion. During the same period, NPAs related to personal loans rose from US$5.2 billion in FY20 to US$11 billion in FY24.
Another concern is that nearly 39% of young borrowers are using credit even for essential expenses such as rent, groceries, and utility bills. Additionally, many individuals are managing between 8 and 15 active credit lines simultaneously, increasing the risk of financial strain.
Wrapping Up
Credit has become an important tool for economic progress and the fulfilment of personal aspirations in India. Millennials remain the largest borrowers due to major life goals and wealth-creation needs. Gen Z is rapidly embracing credit through digital platforms, while elderly Indians are opting for low-risk borrowing by leveraging their accumulated assets. The borrowing behaviour of all three generations reflects India’s evolving economic and social landscape.
Government initiatives have also contributed to this shift. Under the Pradhan Mantri Mudra Yojana (PMMY) scheme, more than 57 crore loans had been sanctioned by March 2026, with a total value exceeding Rs 40.07 lakh crore. Programmes such as Pradhan Mantri Awas Yojana – Urban (PMAY-U) are helping bring more people into the formal financial system.
However, the growing signs of a debt trap cannot be ignored. Credit expansion will remain sustainable and beneficial only if it is supported by strong financial discipline, responsible borrowing practices, and timely repayment habits.
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