Indian’s Can’t Afford Home Renovations, Cars, Basic Furniture; Need Consumer Loans For Everything

The Indian consumer loan market is entering an unprecedented growth phase, driven by rising urbanisation, digital adoption, and a strong appetite for credit among young borrowers. With household consumption projected to grow steadily, consumer loans are becoming a critical part of India’s financial ecosystem. Current estimates suggest that the market, valued at around $400 billion in 2024, could more than double and touch $1 trillion by 2029, marking one of the fastest expansions in the global credit landscape.

This article analyses the drivers of this growth, the key lending segments, risks that accompany such rapid expansion, and the structural changes shaping India’s consumer credit journey.

Rising Consumer Borrowing: The Growth Story

Over the last decade, India’s lending ecosystem has transformed dramatically. A growing middle class, increasing disposable incomes, and changing attitudes towards debt have pushed individuals to embrace credit as part of their financial planning. Younger consumers, especially millennials and Gen Z, are less debt-averse than previous generations, viewing credit cards, personal loans, and Buy Now, Pay Later (BNPL) schemes as convenient tools rather than burdens.

The rise of instant digital loans, powered by fintech partnerships and non-banking financial companies (NBFCs), has also lowered barriers for borrowers. With smartphone penetration nearing 80% and internet access available even in semi-urban regions, credit outreach has widened considerably. As a result, loan disbursals are expected to grow at a compound annual growth rate (CAGR) of over 15% between 2024 and 2029.

Banks, NBFCs, and digital-first lenders are all competing aggressively in this space, with personal loans and consumer durable loans being the fastest growing segments. This appetite for credit is also closely tied to India’s consumption-driven growth model, where household demand forms nearly 60% of the GDP.

Segment-Wise Loan Expansion

India’s consumer loan market is not uniform; it spans several categories, each growing at a different pace. While home loans and vehicle loans remain traditional drivers, unsecured loans such as personal loans and BNPL products are seeing explosive adoption.

To understand this better, let us look at the segment-wise loan distribution projections:

Projected Growth of Consumer Loan Segments (2024–2029)
 

This projection highlights that unsecured retail lending, particularly personal loans, BNPL, and credit card lending, will account for the highest growth. Traditional secured loans such as housing and vehicle finance will continue to dominate in absolute value but will expand at a slower pace compared to new-age credit offerings.

Such a diverse loan landscape demonstrates India’s evolving borrowing behaviour. While aspirational consumption is fuelling demand for BNPL and credit card products, stable income growth supports housing finance and personal loans.

Digitalisation: The Key Enabler

One of the biggest reasons behind this boom is digital financial inclusion. Over 500 million Indians are now part of the formal financial system, thanks to initiatives such as Aadhaar-linked bank accounts, Unified Payments Interface (UPI), and India Stack. These infrastructure reforms have made credit assessment, KYC verification, and loan disbursals faster than ever before.

Fintech players are leveraging AI-driven credit scoring to lend to first-time borrowers who may lack traditional credit histories. This innovation has unlocked access for millions of individuals previously excluded from formal banking channels. Additionally, partnerships between fintechs and banks are enabling co-lending models, helping lenders balance risks while extending reach.

The growing acceptance of BNPL and micro-loans for small-ticket purchases is also an outcome of digital platforms reducing friction in borrowing. In fact, over 60% of personal loans below ₹50,000 are now originated through mobile apps, pointing towards the future of lending.

Emerging Risks in a High-Growth Market

While the numbers are encouraging, the rapid rise in consumer lending also brings challenges. A surge in unsecured borrowing has raised concerns about asset quality, particularly in the case of small-ticket loans where delinquency rates are higher. Rising interest rates globally and inflationary pressures could also strain household repayment capacities.

Additionally, India’s credit penetration, though growing, still remains modest compared to developed economies. Household debt-to-GDP stands at around 14%, compared to 70% in the US and 60% in China. While this leaves room for growth, it also highlights the risk of overheating if lending standards are not closely monitored.

Another concern is the regulatory environment. The Reserve Bank of India (RBI) has already tightened norms on unsecured lending and digital loan apps to protect borrowers from over-indebtedness. Continued vigilance will be essential to prevent systemic risks.

Potential Risks to Consumer Lending Growth
 

While these risks cannot be ignored, they also open up avenues for innovation in risk management, better consumer protection, and stronger lender accountability.

Conclusion

India’s consumer loan market is poised to undergo a structural transformation, doubling in size within the next five years and potentially surpassing $1 trillion by 2029. The drivers of this growth lie in rising consumer aspirations, digital innovation, and wider access to credit across urban and semi-urban India. However, with this expansion comes the responsibility of managing risks—especially in the unsecured loan segment—through careful regulatory oversight and smarter credit evaluation.

If lenders, fintechs, and regulators strike the right balance between growth and prudence, India’s consumer loan market could not only reshape domestic consumption but also set a global benchmark for how emerging economies integrate technology and credit.

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LoansJagat Team

‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.