GenZ has captured India’s imagination and has had quite a year. The youth protests over examination irregularities, that began in Delhi and spread across the country, have focused attention on issues of education, jobs and opportunity. Interestingly, the credit industry has been paying close attention to them, but for a very different reason.
It has discovered GenZ as a prime borrowing market, along with young consumers, informal workers, rural households and small entrepreneurs. A recent report by Equifax, one of India’s four credit information companies (CIC), has packaged this as ‘Aspirational India’. It is not alone. Multiple reports by CICs, think tanks, NITI Aayog and even the Reserve Bank of India (RBI) have been looking at this borrower group. The message is upbeat: credit is reaching people, towns and businesses that were once excluded from the formal financial system.
The Credit Boom
The numbers explain the excitement. According to the Equifax report, in January-March 2026, this group accounted for 79% of India’s 14 crore retail loan originations, valued at ₹19 lakh crore. Outstanding assets under management (AUMs) for this group stood at ₹132 lakh crore by June, with 73% in value terms coming from rural and semi-urban India.
For lenders, these numbers signal a big business opportunity. For young Indians, it does look like a story of financial inclusion, especially when the report puts out illustrative examples of how a tiny loan for a phone, scooter, education course or small business kick-started an employment opportunity, or helped with a family emergency when other alternatives were unavailable.
But there is another story buried behind the headline data.
Equifax finds that 31% of GenZ borrowers already have two or more active credit accounts at their first origination. It also shows that delinquency rises as the number of loans increases. The industry calls this loan stacking: one borrower, multiple loans, often from multiple providers. Moneylife Foundation’s study has explored this in detail in May this year (Debt Traps on Phones: App Lenders Remain Unchecked).
TransUnion CIBIL, another credit bureau, released a nine-year study of India’s credit expansion in July this year which tells much the same story from a different angle. Unlocking Access: Journey of Credit Expansion in India says younger consumers accounted for 80% of leveraged originations in the latest year. The proportion of eligible Indians who have ever taken formal credit rose from 35% in March 2017 to 74% in March 2026. The share of consumption credit—which includes personal loans, credit cards and borrowing for consumer durables—rose from 34% to 51% of credit-active consumers. At the same time, over-leveraged loan originations rose from 5% in FY16-17 to 18% in FY23-24, before moderating to 15% in FY25-26.
A third credit bureau, CRIF High Mark, released a study in September 2025 that took a closer look at digital lending. The 2025 Finsight report found that 65% of fin-tech customers of non-banking finance companies (NBFCs) were below 35 years. Importantly, the number of borrowers with two or more active loans rose from 37.2% in June 2023 to 43.5% in June 2025. The report itself says that this may reflect product diversification but it also signals potential over-leveraging.
Small Loans, Big Problem
Now let us look at how this is happening. Moneylife Foundation’s counselling sessions, conducted by Aparna Ramachandra, founder of Rectify Credit, provide an unusually detailed view of loan stacking and serious debt traps. This was expanded into a detailed study released in July 2026 (Digital Credit Without Limits).
Moneylife Foundation’s study examined 110 apps and actual cases arising from counselling requests. We found loan stacking reaching extraordinary levels. In several cases, the monthly repayment obligation was substantially higher than the borrower’s income. One contract worker earning ₹12,000 a month had six app loans with combined monthly instalments of ₹46,700. Many borrowers had 14 or more simultaneous loans; and this pattern continues to appear in fortnightly counselling sessions.
These are not representative of India’s young borrowers as a category—they are examples of delinquency and debt traps. But that is precisely why they matter. Credit-bureau reports and macro studies tell us about credit growth and multiple borrowing; they do not necessarily connect those loans with individual or household incomes and budgets.
Moneylife Foundation’s study has already reported how several short-tenure loans, especially payday loans, advertised rates of 30%-57.45%, while several digital apps charged 1% a day—365% a year before compounding. Processing fees of up to 15% were deducted upfront. In other words, the actual cost borne by borrowers can be significantly different from the headline interest rate.
Many borrowers are unaware of the impact of such rates, particularly when they are expressed as a daily charge. In several cases, app loans are taken in quick succession to avoid defaulting on credit cards, personal loans and car loans. That can turn a temporary cash-flow problem into an impossible debt trap; abusive recovery practices can make the consequences even more severe.
A ₹10,000 loan may look harmless at portfolio level. Six or seven such loans, taken in quick succession to repay earlier borrowing, can produce an entirely different household liability. A low-ticket loan becomes dangerous when a borrower keeps taking another one simply to repay the previous borrowing and avoid ‘spoiling’ her credit record.
This is where the language of financial inclusion can conceal as much as it reveals.
India correctly wants young people to enter the formal credit system. Credit can finance productive assets, smooth irregular incomes, create job opportunities and help small entrepreneurs. A two-wheeler, for instance, can be essential for gig employment and a loan can create that opportunity. At the same time, digital lending has dramatically reduced the friction involved in obtaining a loan. Someone unable to pay the equated monthly instalment (EMI) on a two-wheeler can download an app and obtain a loan within minutes to paper over an existing financial problem. That can become the first step towards a downward financial spiral.
Speed is useful only when the underlying borrowing is affordable.
Disclosure Is Not Affordability
This is not a new concern. Dvara Research, a think tank, warned about it in 2021, well before today’s latest credit boom. Its research pointed out that default is a late indicator of over-indebtedness: households can be in serious financial distress long before a loan becomes overdue. It proposed that RBI require lenders to report a common measure of debt-service capacity, essentially comparing repayment obligations with the income left after expenses. It also suggested tracking the number of loans per borrower as an early-warning indicator.
The point is simple. A borrower’s ability to service a new EMI depends not merely on income but on what remains after essential expenses and existing debt obligations. The credit system needs to track this more closely.
RBI has certainly tightened the framework around digital lending. The regulatory architecture requires regulated lenders to assess creditworthiness, disclose the annualised cost of credit through a ‘Key Facts Statement’, provide a cooling-off period and take responsibility for their digital lending partners. RBI has also used supervisory action against lenders whose pricing it found excessive.
But there is a difference between requiring disclosure of a price and determining whether the price is affordable. More frequent reporting to credit bureaus is another useful step; but it still does not answer the question of how much total repayment a borrower can afford.
The credit-bureau reports also show that consumption credit is increasingly important among younger borrowers. For them, small personal loans, consumer loans and two-wheeler finance can precede the traditional credit-card-to-vehicle-to-housing progression. But small unsecured loans can be easy to obtain, easy to repeat and difficult to service when incomes are irregular.
CRIF’s data also show higher delinquency in some small-ticket lending segments. This does not mean that India is headed for a debt crisis. Portfolio-level delinquency remains manageable, even as the data show clear stress in some small-ticket and multi-loan segments.
The Missing Test
But the warning signs are unmistakable. Moneylife Foundation has seen distress cases where borrowers with comfortable jobs and six-figure monthly incomes land in a debt trap after stock-market trading losses or sudden medical emergencies. In several cases, six or seven high-interest app loans taken to paper over the problem become the tipping point.
The distinction between aspiration and affordability is what the regulator needs to address. It is good that credit is improving lives and livelihoods and that app-based loans are reaching borrowers in smaller towns or helping women become entrepreneurs. But the impact of over-indebtedness, as Dvara’s research shows, extends beyond a default. It can mean postponing education, borrowing from family and informal sources, or sacrificing essentials.
The RBI’s own Financial Stability Report shows that household debt has risen substantially and consumption loans account for a large share of household borrowing. It has also identified elevated impairment among borrowers with unsecured loans from multiple lenders.
These are reasons to take multiple unsecured borrowing seriously as a stress factor.
The key now is to move from disclosure to suitability. That will determine whether ‘Aspirational India’ is a story about financial inclusion—or simply a more sophisticated way of selling tomorrow’s income today.
Moneylife Foundation will examine these issues at a seminar on digital lending and loan stacking on 1st October at YB Chavan auditorium in Mumbai. For details and registration click here:
An incisive article and indeed a wake up alarm! There is a relentless push by banks and financial institutions including financial apps offering EMIs for every product on sale in the market. Most expensive lifestyle product ads dont mention product prices but only monthly EMI amounts luring gullible families into a purchase. We hear of so many suicide cases where financial issues and debts were the cause. Banks are more interested in roll overs rather than repayments, as long as interest payments keep coming in. Every credit issuing bank wants to convert outsatnding cerdit card bills into EMIs, keeping card holders in perpetual debt. This pyramid of irrespnsible lending and borrowing is bound to collapse sooner than later.
Moneylife deservs cudos for this well researched and timely article; it may not be an exaggeration to call it an equivalent of "whistle blowing" albeit from outside the system.
There are several reasons for the debt overhang but the main culprit is the relentless propoganda about unstoppable economic growth and the promise of sunny uplands for generations to come. Youngsters also bought wholeheartedly into the narrative that aspirational living means borrowing and buying! This generation was also dazzled by the wealth display of that part of the society which bebefited from all pervasive corruption!
To keen observers of the socio-economic scene it is obvous that the bubble is about to burst if not already so.
The digital lines of credit are unmistakable. Quodo to the MLF study. Mrs. Sucheta Dalal has done a good job. But the PSBs are yet to learn the lessons. The simple point that they should learn is unmistakable.
Cybercrime has become so woven into everyday life that most of us have stopped thinking of it as something that only happens to ‘careless’ people. Barely a day goes by without another story doing the rounds — someone losing money over...
Not so long ago, spotting a scam was fairly straightforward. A badly worded message, an email that just looked off (like a prince from a far, far away place announcing he was donating his wealth via email without even knowing your...
There is a particular kind of online trap that works precisely because it does not even look like a scam at all. No threatening message. No stranger posing as a bank official. No demand for a one-time passcode (OTP). Just an app, an...
The July 'cockroach' protests at Jantar Mantar in New Delhi brought forward two important outlooks. First, students and youngsters who make up 'Gen Z' have emerged as a very strong voice for all who are oppressed. The second, and most...
Fiercely independent and pro-consumer information on personal finance.
1-year online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
30-day online access to the magazine articles published during the subscription period.
Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
This means access to other articles (outside the subscription period) are not included.
Articles outside the subscription period can be bought separately for a small price per article.
Fiercely independent and pro-consumer information on personal finance.
Complete access to Moneylife archives since inception ( till the date of your subscription )
Perpetual hope for a rising stock market often fuels market euphoria. It drives unaffordable leaps.
There are several reasons for the debt overhang but the main culprit is the relentless propoganda about unstoppable economic growth and the promise of sunny uplands for generations to come. Youngsters also bought wholeheartedly into the narrative that aspirational living means borrowing and buying! This generation was also dazzled by the wealth display of that part of the society which bebefited from all pervasive corruption!
To keen observers of the socio-economic scene it is obvous that the bubble is about to burst if not already so.