UPI Drives Financial Inclusion and Credit Expansion, Says Economic Survey 2026
The Economic Survey 2026, released on Thursday, underscores how investments in digital public infrastructure, particularly the Unified Payments Interface (UPI), are transforming India's credit markets. According to the survey, UPI enables banks and fintech firms to extend lending across the risk spectrum, with fintechs playing a distinctive role in reaching new-to-credit borrowers previously excluded from formal finance.
Catalytic Role of Interoperable Payment Systems
Citing a working paper titled 'Breaking Barriers to Financial Access: Cross-Platform Digital Payments and Credit Markets (2025)' by Shahswat Alok, the survey notes that a public, interoperable payment infrastructure like UPI acts as a catalyst. It converts basic financial access into active participation by generating verifiable transaction histories and reducing costs. "A growing body of research shows that a public, interoperable payment infrastructure can play a catalytic role in this transition by converting basic access into active financial participation," the survey states.
From Account Ownership to Credit Access
The paper emphasizes that while expanding bank accounts is foundational, effective usage determines whether financial inclusion leads to economic opportunities. Regions with affordable internet and widespread account penetration saw the strongest credit growth, highlighting the layered nature of inclusion and the complementary roles of traditional banks and new entrants.
Financial Inclusion Index and Credit Growth
The RBI's Financial Inclusion (FI) Index rose to 67.0 in March 2025 from 64.2 in March 2024, with steady growth across all sub-indices measuring access, usage, and quality in banking, investments, insurance, postal, and pension sectors. Importantly, credit linked to digital payments has not increased default rates. Instead, more transaction data helps lenders identify underserved but creditworthy borrowers, enabling financial deepening without portfolio deterioration.
Key credit statistics from the survey include:
- Bank credit grew 14.5% year-on-year in 2025 to ₹203 trillion.
- Personal loans increased 8.9% to ₹16.3 trillion as of November 2025.
- Credit card outstanding rose 2.4% year-on-year to ₹3 trillion in November 2025.
Household Indebtedness and Economic Growth
Household indebtedness surged past its five-year average to 41.3% of GDP in FY25, with retail consumer loans growing consistently since March 2019. Non-housing retail loans, largely for consumption, accounted for 55.3% of household borrowings in H1 FY26, while housing loans made up 28.6%, and agriculture and business loans comprised 16.1%.
On the economic front, India's real GDP grew at a six-quarter high of 8.2% in Q2 FY26. The RBI projects real GDP growth for FY26 at 7.3%, with the Economic Survey projecting 7.4%.
UPI's Impact on Economic Output and Usage
The survey cites a May 2024 paper by T. S. Dubey and A. Purnanandam Dubey, 'Can Cashless Payments Spur Economic Growth?', which links UPI adoption to higher economic output. A 2025 Artha Global survey of 4,800 respondents in Maharashtra and Bihar shows UPI as a general-purpose instrument:
- At least 60% use it for store purchases, peer-to-peer transfers, bill payments, and online commerce.
- Nearly 80% use UPI for three or more distinct use cases, with similar patterns across gender and rural-urban divides.
Record UPI Transactions in 2025
UPI achieved new highs in 2025, with record transactions in December in both value and volume. According to NPCI data:
- UPI processed 228 billion transactions worth ₹300 trillion in 2025, up 33% in volume and 21% in value from 2024.
- In December 2025, it processed 21.6 billion transactions worth ₹30 trillion, up 29% in volume and 20% in value year-on-year.
- Daily averages were 698 million transactions and ₹90,217 crore in value.
UPI as an Integral Economic Component
The survey notes that UPI has become "an integral part of routine economic activity", complementing rather than displacing cash. Over 90% of UPI users continue to use cash regularly, reflecting a hybrid payments ecosystem. "Rather than a simple transition to cashlessness, the evidence points to a gradual, layered evolution in which real-time payments expand choice, convenience, and efficiency while coexisting with established modes of exchange," it states.
Challenges and Future Priorities
Despite progress, "friction areas" persist due to digital divides, not resistance to the system. The next phase of inclusion requires deepening digital capabilities, awareness, and confidence to distribute UPI's benefits more evenly. Long-term sustainability depends on continued investment in infrastructure, reliability, and risk management while preserving openness and interoperability.
The survey highlights UPI's zero-cost, public-good design as central to rapid adoption, especially among small merchants, making digital payments the default for everyday transactions. "Its significance lies not only in scale, but in how it has integrated digital payments into routine economic life, strengthened the link between access and credit, and created a platform for inclusive growth," it concludes, urging complementary investments in digital capability and institutional capacity.
Supporting Digital Infrastructure
Other digital public databases like the Account Aggregator (AA) framework are also noted for supplying lenders with verified data such as bank transactions and GST records, further supporting credit growth among underserved and first-time borrowers.
