Credit Revolution Fuels India's Economic Ascent to Global Top Three
As India recently celebrated its 77th Republic Day, the nation's credit sector stands as a pivotal pillar in its ambitious economic journey toward becoming a global powerhouse and securing a position among the world's top three economies. Over recent years, India has emerged at the forefront of financial evolution and innovation, demonstrating remarkable progress despite its vast scale and complexity.
Digital Payments and Lending Diversity Set Global Benchmarks
India today operates the world's most widely adopted real-time payment system through the Unified Payments Interface (UPI), which offers 24×7, near-zero-cost transactions. This contrasts sharply with developed economies that remain heavily reliant on card-based, fee-intensive payment networks. In December 2025 alone, nearly 695 million transactions were processed daily through UPI, with a monthly value exceeding ₹26 lakh crores.
Furthermore, India ranks among the few countries globally to provide such a wide diversity of lending products with meaningful penetration across its massive population. This achievement is particularly commendable given India's immense scale, diversity, and complexity. With 28 states and eight union territories, the nation encompasses 22 scheduled languages and highly diverse geographies ranging from hilly terrains and deserts to dense metropolitan cities. Despite these challenges, access to credit continues to expand steadily across all regions and demographics.
Economic Resilience Amid Global Volatility
As the world's fourth-largest economy, India's GDP reached approximately USD 4.18 trillion in 2025, surpassing Japan and becoming increasingly intertwined with global supply chains. Exports are projected to hit $1 trillion in FY 2025-26. However, heavy reliance on imported oil, which constitutes 90% of consumption, exposes the economy to geopolitical tensions, tariff shifts, and commodity shocks that influence inflation, domestic demand, and credit behavior.
Despite hurdles like pandemics, wars, and trade restrictions, robust economic fundamentals and vigilant oversight by the Reserve Bank of India have sustained low Gross Non-Performing Asset (GNPA) ratios at 2.1% as of September 2025. This demonstrates the lending sector's remarkable resilience through data-driven strategies and strong regulatory support.
Credit Growth Driving Consumption and MSME Expansion
Credit growth has played a crucial role in powering India's economy through multiple channels. It drives consumption and boosts everyday spending on both discretionary and aspirational products. Demand for credit has been particularly strong in secured lending products such as car loans and home loans, while unsecured lending—including small-ticket loans, consumer durable loans, and credit cards—has experienced solid double-digit growth.
Lending focused toward Micro, Small, and Medium Enterprises (MSMEs) has provided significant momentum to GDP growth. MSMEs, which account for nearly half of India's manufacturing and employ 11 crore people, have been ably supported by lending initiatives and timely credit guarantee schemes. This trend has reached across geographies, extending to smaller towns and rural areas.
Lending enables businesses to grow by supporting investment in new technology and expansion without depleting cash reserves. Exporters also utilize working capital to produce and export more goods overseas, creating jobs as credit becomes more accessible. In September 2025, total credit exposure reached ₹47.5 lakh crore, with 11% year-on-year growth, with small and medium segments leading the expansion, according to the latest How India Lends Report published by CRIF Highmark.
Public-Private Partnerships Enable Financial Innovation
Public-private partnerships have played a critical role in positioning India on the global financial innovation map within a relatively short period. India has achieved near-universal digital identity coverage, with Aadhaar covering over 90% of the adult population, whereas most developed economies continue to rely on fragmented or voluntary identification systems.
The JAM Trinity—Jan Dhan, Aadhaar, and mobile penetration—supported by extensive banking and Non-Banking Financial Company (NBFC) networks, has been a key enabler of India's lending evolution. Approximately 85.5% of Indian households possess at least one smartphone, with similar proportions having access to internet within household premises.
Large public sector banks have provided deep geographic penetration through robust branch networks, while private sector banks have driven innovation. FinTech and TechFin players have further accelerated true digitization. According to the latest How India Lends Report, personal loans, primarily sourced through digital channels, were the largest in origination volumes at approximately 425.7 lakh loans in Q2 FY26.
Technology Transforming Credit Origination
These entities work in tandem, competing for the right borrower segments and growth opportunities while simultaneously collaborating to build the technology and infrastructure required for sustainable growth. Technology providers have partnered with banks and large NBFCs to enable advances in verification, document validation, fraud control, and near-instant credit delivery.
Paperless onboarding through e-KYC, e-sign, and DigiLocker, combined with API-based identity and income verification and automated underwriting, has significantly reduced the time and cost of credit origination in India. The country now boasts one of the lowest marginal costs of originating small-ticket loans globally, enabled by a fully digital and interoperable lending stack.
Building a Resilient Lending Ecosystem
The lending ecosystem in India has been guided by strong regulatory guardrails. During and after the COVID-19 period, despite global headwinds from geopolitical conflicts and their impact on global trade, India continued to demonstrate robust growth and maintain a healthy, sustainable lending portfolio. This resilience was enabled by the strong foundational framework established by lenders operating under clear and consistent regulatory guidance.
During the challenging pandemic period, large public sector banks and private sector banks continued to serve their customer base, while NBFCs and fintechs invested in strengthening technological frameworks to make digital processes more resilient and smoother. Businesses impacted by lockdowns and export restrictions were supported through government guarantee schemes and moratoriums, enabling continuity even during difficult economic periods.
Through measures like stamp duty reductions and inflation management, lending for secured assets continued steadily. Unlike several developed economies where lending became skewed toward unsecured, consumption-led products, delinquency and asset quality indicators in India remained range-bound. This was achieved through effective measures such as portfolio segmentation, proactive customer engagement, loan restructuring, and the development of early warning systems to anticipate and manage potential delinquencies.
Credit Bureaus as Growth Enablers
Over the past decade, credit bureaus in India have emerged as reliable partners for lending institutions, extending their role beyond merely enabling credit access. Their importance has increased significantly in recent years. Credit scores and bureau insights help lenders build data-driven, insight-led credit strategies that span the entire customer lifecycle and multiple customer journeys.
Today, credit bureaus provide intelligence that enables lenders to identify borrowers who are not only likely to seek credit but are also creditworthy, sustainable, and profitable over the long term. Additionally, credit bureaus offer early-warning, data-led insights and portfolio analytics that help lenders manage risk within their existing portfolios.
Beyond supporting lenders, credit bureaus in India are playing an active role in borrower education and credit awareness. They play a more active and ecosystem-enabling role compared to many global peers, supporting the transition of borrowers from thin-file to thick-file credit profiles. Indian credit bureaus have significantly expanded coverage of MSMEs and new-to-credit borrowers, helping integrate previously excluded cohorts into the formal credit ecosystem.
Promoting Financial Awareness and Responsible Behavior
Beyond risk assessment, credit bureaus in India have actively played a crucial role in promoting borrower education and financial awareness, strengthening responsible credit behavior across the ecosystem. In many developed markets, credit bureaus primarily function as passive data repositories, whereas in India, they increasingly act as growth enablers and help partners for sustainable and inclusive credit expansion.
This has helped borrowers gain a better understanding of their rights and responsibilities when accessing credit from formal institutions such as banks and NBFCs. Sustainable and robust credit growth ultimately depends on disciplined and responsible borrower behavior—a foundation that credit bureaus are increasingly helping to strengthen.
Future Outlook: Toward Global Economic Leadership
In recent decades, India has made significant progress in financial inclusion and continues to advance credit inclusion at scale. Access to credit and finance remains a main focus area for India's aspiration of becoming one of the world's largest economies. Household debt stood at 41.3% of GDP as of end-March 2025, substantially lower than the 65–100% range observed across most developed economies, reflecting lower systemic leverage.
This presents a substantial opportunity to strengthen, broaden, and deepen credit penetration and financial inclusion. The availability of clean data, advanced analytics, and AI-driven risk models is enabling lenders to address this gap more effectively. These capabilities are not just helping institutions sustainably expand access to credit but are also making progress toward inclusion faster, broader, and more resilient.
Looking forward, robust credit growth will propel India to become the world's third-largest economy by 2030 and beyond, powering infrastructure development, manufacturing expansion, and job creation. By prioritizing responsibility over rapid leverage, India is charting a blueprint for emerging markets worldwide.
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.
