73% of aspirational credit comes from rural, semi-urban India: Report | Personal Finance

As many as 8 million “aspirational” customers accounted for 79 per cent of retail credit originations in January-March 2026, said a report on Thursday, marking how people with little or no conventional credit history are shaping the loan market.

 

Such borrowers accounted for Rs 19 trillion of the Rs 24 trillion total retail credit originations during the quarter, according to the report by Equifax India, a licensed credit information company. Their outstanding assets under management stood at Rs 132 trillion as of June 2026, against Rs 167 trillion for the overall retail credit market.

 

The report, Aspirational India: Retail Credit Market Performance, points to a broader change in India’s borrowing landscape. Credit is increasingly reaching younger consumers, rural households, informal workers and small entrepreneurs through digital platforms and newer forms of underwriting.

  

Nearly 73 per cent of the credit value generated by aspirational borrowers came from semi-urban and rural markets, highlighting the growing importance of smaller cities and rural India to the next phase of retail lending.

 

Gen Z in credit market

The profile of the first-time borrower is also changing. Younger consumers are beginning their formal credit journey earlier, often using credit for consumption, mobility or income generation rather than waiting for traditional milestones such as buying a house.

 

Among “Lifestyle Seekers” identified by Equifax, just 1 per cent currently enter formal credit, but their average initial borrowing is around Rs 67,000. Gen Z makes up 55 per cent of this segment and millennials 31 per cent.

 

About 68 per cent of these borrowers use fintech platforms for products such as consumer loans, two-wheeler finance and credit cards.

 

Equifax expects smaller early loans, including buy now, pay later, short-term personal loans and consumer credit, to potentially become stepping stones to larger products such as vehicle loans, credit cards and home loans as borrowers’ incomes rise.

 

This means a limited credit history may no longer necessarily mean limited information about a borrower.

 

Digital transactions

 

For new-to-credit customers, traditional documents such as salary slips may not adequately capture their ability to repay. This is particularly relevant for people with irregular incomes.

 

The report highlights the growing role of UPI transaction records, Account Aggregator data, the Unified Lending Interface (ULI), GST-linked information and other alternative data in credit assessment.

 

Street vendors are one example. Only 1.1 per cent of the segment currently accesses formal credit, with an average initial ticket size of Rs 44,000. About 65 per cent are Gen Z borrowers and 61 per cent rely on fintech platforms for immediate credit needs.

 

For such borrowers, regular digital transactions could provide lenders with a clearer picture of cash flows than conventional income documents.

 

Rural borrowers also remain relatively underserved. Rural Bharat Aspirants have only 0.7 per cent new-to-credit penetration, despite having a relatively high average initial ticket size of Rs 1.02 lakh. Women account for 47 per cent of this segment.

 

Their borrowing journey can start with Kisan Credit Cards, agricultural loans or personal loans before expanding to gold loans and business credit.

 

Women-led micro businesses 

 

The shift is also visible among small entrepreneurs. Emerging “micro ventures” have new-to-credit penetration of 2.6 per cent and an average ticket size of Rs 1.72 lakh.

 

Women account for 78 per cent of this segment, with millennials and Gen Z women increasingly using unsecured business and gold loans for inventory, working capital and expansion.

 

Equifax says lenders could use cash-flow-based underwriting more extensively instead of depending heavily on land or other physical collateral. This could help small businesses that may have limited assets but demonstrable business cash flows.

 

Easier credit also brings a risk

 

The expansion of credit does not automatically mean healthier borrowing.

 

According to the report, 58.4 per cent of retail debt is unsecured. It also finds that 31 per cent of Gen Z consumers have two or more active credit accounts at the time of initial origination.

 

Small personal loans below Rs 50,000 have a 6.4 per cent default rate, while subprime borrowers use 48 per cent of loan proceeds for direct lifestyle consumption.

 

This makes responsible underwriting important as credit becomes increasingly available through mobile platforms. Structured EMIs, transparent credit lines and models that reward good repayment behaviour could become more important as lenders compete for new customers.

 

AI in lending

 

The next stage could involve combining alternative data with artificial intelligence.

 

Equifax envisages AI-driven lending systems that can assess applications using live transactional information, Account Aggregator data and ULI rather than relying only on historical bureau records and static documents.

 

For rural borrowers, digital land records and ULI could also reduce the need for physical verification. The report says this could eventually bring approval times for products such as tractor, dairy and farm-mechanisation loans from weeks to less than 30 minutes.

 

The bigger shift, therefore, is not simply towards faster loans. It is towards lenders understanding how different borrowers earn, spend and repay, and using that information to decide how much credit they can responsibly afford.

 

India’s next credit cycle could consequently be shaped less by the traditional salaried borrower and more by first-time, rural, young and entrepreneurial customers whose financial footprints are increasingly becoming visible through the digital economy.