A dramatic transformation is sweeping through India's borrowing landscape as the country's lower-middle class, representing nearly two-thirds of the population, shifts from using credit for basic survival to funding ambitious life goals and entrepreneurial dreams.
The Great Credit Transformation
According to the comprehensive 'How India Borrows 7.0' study by Home Credit India, borrowing behavior has evolved significantly from credit serving as a safety net for necessities to becoming a powerful catalyst for aspiration and self-reliance. The report highlights that credit instruments including credit cards and personal loans are increasingly being deployed to elevate living standards, invest in business ventures, and achieve long-term financial objectives.
Ashish Tiwari, Chief Marketing Officer of Home Credit India, captured this cultural shift perfectly: "The How India Borrows 7.0 study reflects a shift in India's credit culture - from borrowing for survival to borrowing for success. Gen Z, Millennials, women, and smaller cities are leading the digital lending revolution, valuing speed, simplicity, and personalisation."
Top Reasons Indians Are Borrowing Now
The study reveals fascinating insights into what drives borrowing decisions in 2025. The primary reason for taking loans remains the purchase of smartphones and home appliances at 46%, underscoring the critical role of connectivity and comfort in daily life.
However, the most significant development emerges in entrepreneurial borrowing. A notable 25% of borrowers now seek loans for business expansion or start-ups, marking a substantial increase from 21% in 2024. This surge signals a confident move toward self-sufficiency and capital formation among India's aspiring entrepreneurs.
Other borrowing categories demonstrate targeted financial planning and responsible credit utilization:
- Home renovation/construction: 12% (down from 15% in 2024)
- Education loans: 4% (stable year-over-year)
- Marriage loans: 2% (decreased from 5% in 2024)
- Vehicle loans: 4% (down from 6% in 2024)
Digital Revolution Fuels Financial Empowerment
Digital adoption has emerged as the central engine driving this financial transformation, marking a decisive shift toward a tech-driven credit ecosystem. The study finds that 65% of borrowers now actively use mobile banking, highlighting growing comfort with digital financial transactions.
Internet banking usage has climbed to 46%, with Gen Z (51%) and Millennials (49%) leading this digital charge. Interestingly, regional patterns reveal surprising leaders in digital adoption. Cities like Chennai (59%) and Delhi NCR (53%) record the highest usage rates, reflecting strong digital trust and maturity.
Surprisingly, traditional financial hubs like Mumbai and Bengaluru lag at 39% each, indicating that infrastructure alone doesn't guarantee adoption—consumer habits and trust play equally critical roles in digital financial inclusion.
Credit as Strategic Enabler: Building Futures
The study identifies the most common near-term purposes for borrowing as starting or expanding a business (34%) and buying a home (28%), highlighting India's dual ambition of economic mobility and home ownership.
Gen Z emerges as the most aspirational cohort, with 35% pursuing business ventures and 32% aiming for home ownership. In fact, Gen Z shows stronger home ownership ambitions than both Millennials and Gen X. The research also reveals geographic preferences—metros (32%) show higher intent for home ownership, while Tier 1 cities (37%) lean more toward entrepreneurship.
The comprehensive study surveyed borrowers aged 18-55 years across 17 major Tier 1 and Tier 2 cities, covering diverse income groups and professions. The sample comprised predominantly males with an average age of 33 years and an average monthly income of ₹34,000.
This transformation in borrowing behavior represents more than just financial evolution—it signals a fundamental shift in mindset among India's growing middle class, who are increasingly viewing credit not as a last resort but as a strategic tool for building better futures.
