India's Gen Z consumers are adopting credit cards faster and spending more than millennials, according to a recent TransUnion CIBIL report. While credit access has expanded rapidly, rising delinquency rates among high-exposure users are becoming a concern for lenders. This shift in borrowing habits highlights the growth of unsecured credit alongside potential credit quality challenges.
Younger Indians are entering the credit market at a faster pace than previous generations, with those aged 24 to 30 showing a distinct preference for early credit card adoption. A report by TransUnion CIBIL reveals that Gen Z consumers are not only securing their first credit cards sooner but are also managing multiple credit products within a short timeframe. As of March 2024, nearly 28% of Gen Z credit card holders reported monthly spending of ₹25,000 or more, a threshold met by only 20% of millennial cardholders during the same life stage.
Rapid Expansion of Credit Products
The data shows that one in two new young cardholders now obtains a second credit card within just one year of receiving their first. This rapid acquisition trend is supported by broader industry numbers. Over the last ten years, the total outstanding credit card balance in India has grown significantly, rising from approximately ₹0.4 lakh crore to ₹3.1 lakh crore. During this same period, the number of individuals holding credit cards increased from 1.4 crore to 5.2 crore. Despite this growth, credit cards are becoming a smaller piece of the total unsecured loan market, as consumers increasingly utilize various other forms of personal and consumption-based credit.
Credit Quality and Delinquency Trends
While the expansion of credit access reflects changing consumption habits, the report also highlights risks associated with higher credit exposure. Delinquency rates—which measure the percentage of loans where payments are late—are notably higher among users with more experience and a larger number of credit products. For individuals who have opened three or more personal loans within the past 24 months, the delinquency rate has climbed to 8.7%. This contrasts sharply with newer cardholders with less than two years of experience, who maintain a much lower delinquency rate of 1.2%.
Investor Monitorables for Financial Institutions
For investors tracking the banking and financial services sector, these trends are important for evaluating the future health of loan portfolios. The shift toward multiple unsecured products suggests that while revenue growth for lenders may be supported by higher volumes, the quality of these assets could face pressure if economic conditions tighten. Investors may monitor future quarterly earnings reports from credit-issuing banks and non-banking financial companies to see how these lenders manage risk for younger, high-exposure cohorts. Specifically, the divergence in delinquency rates between new and experienced users will be a key metric to track in order to understand how effectively lenders are monitoring the repayment capabilities of their younger customer base.