Data Reshapes India's Credit Market

The transformation in India's retail credit market marks a major shift, moving from old credit histories to real-time financial behavior. Digital growth and consumer engagement with credit data promise more financial inclusion but also introduce significant risks that need careful monitoring.

Data Drives Access, But Risks Emerge

India's credit system is becoming more data-heavy. Equifax notes that loan approvals and pricing now depend on usage patterns and repayment habits. This detailed approach, along with digital lending's spread, is increasing credit access for underserved people and smaller towns. A striking development is 'active credit ownership,' where 183 million Indians checked their credit scores by December 2025, a 27% yearly jump. This borrower engagement, often improving scores, shows a more informed consumer base taking charge of their credit health. Fintech platforms like Paytm and PhonePe offer free credit scores, making access much cheaper than in Western markets.

Unsecured Lending Surges, RBI Tightens Rules

Credit expansion has heavily favored unsecured loans, which now make up about 25.3% of total credit from scheduled commercial banks as of March 2024. This rapid growth has caught regulators' attention. The Reserve Bank of India (RBI) has responded by tightening rules, increasing risk weights on consumer credit and credit card receivables to strengthen banks and slow excessive growth. These steps aim to make the banking sector stronger against potential shocks and control rising loan defaults that have accompanied the unsecured lending boom. Despite these actions, retail credit as a percentage of GDP has doubled in the last decade to 18% in FY25.

Competition and Fintech's Growing Role

The Indian credit information sector includes major global players like Equifax (EFX market cap ~$23.95B, P/E ~36.88) and TransUnion (TRU market cap ~$15.1B, P/E ~33.79). In India, TransUnion CIBIL and Experian India are key players, with Experian India reporting ₹531 Cr in revenue as of March 2025. The fintech sector, valued at an estimated USD 51.2 billion in 2025 and projected to reach USD 145.57 billion by 2032, is a major driver, accounting for about 43% of the market through digital lending. Fintechs are particularly strong in small personal loans, offering flexible solutions but also operating with less regulated data reporting, which raises transparency concerns. The overall Indian fintech market is expected to grow at a 16.1% CAGR through 2032.

Mounting Risks in Data-Driven Lending

While more data use and consumer awareness should improve loan quality, the fast growth in unsecured lending presents substantial risks. Credit card delinquencies have risen, with loans 91-180 days past due increasing to 7.6% by June 2024. Using alternative data for credit scoring, while promoting inclusion, could create new risks if not carefully checked against established standards. The RBI's tighter regulations, though needed for stability, could also slow growth and increase borrowing costs for consumers and businesses. Credit card penetration is still low at about 5-6% of the adult population, suggesting room for expansion but also showing how sensitive this market is to regulatory changes and economic downturns. Additionally, some fintech lenders may lack the strong risk controls of traditional banks, potentially worsening problems with loan quality and defaults.

Future Growth and Stability

India's retail credit market is expected to see continued strong growth, with consumer credit predicted to reach USD 91.88 billion by 2033 at a 9.70% CAGR. The future will likely involve more integration of AI and machine learning for tailored banking services and automated lending. However, this growth's future depends on balancing innovation and strong risk management, ensuring that the push for financial inclusion does not lead to broader financial instability. Regulators will likely keep focusing on managing unsecured loan risks, ensuring data accuracy, and promoting responsible lending practices.