Gen Z has become the single largest cohort of first‑time borrowers in India, accounting for about 41 percent of all new‑to‑credit consumers according to TransUnion CIBIL’s latest Credit Market Indicator report. At the same time, lenders have sharply reduced new‑to‑credit originations, with loans to fresh customers falling around 21 percent as banks and NBFCs tighten rules on unsecured and consumption led lending. This mix of high Gen Z interest and stricter screening is reshaping how young Indians in their 20s approach credit in 2025 and how they will borrow through 2026.
A generation eager to start, but facing a higher bar
CIBIL’s data shows that Gen Z, defined as those born in 1995 or later, now makes up roughly 34 percent of India’s credit eligible population but still has the lowest credit penetration, at about 16 percent. Many of these first‑time borrowers are women and residents of semi urban and rural areas, where lenders are actively pushing inclusion by offering small personal loans, consumer durable finance and gold backed products as on‑ramps into the formal system. Yet credit supply to new‑to‑credit youth has moderated, with originations to 18 to 35 year olds slowing and approval rates for NTC consumers dropping as risk models are recalibrated after a surge in unsecured lending.
Young borrowers themselves are also behaving differently. Surveys and credit market commentary suggest that Gen Z prefers flexibility, smaller ticket sizes and short tenures, and is more cautious about running up large, long term EMIs for consumption, even as they continue to use personal loans and BNPL for lifestyle and career investments. This cautious appetite has contributed to a softer overall Credit Market Indicator score, but it also indicates a maturing relationship with credit where the first loan is increasingly seen as a strategic step rather than an impulsive convenience.
“India’s youngest borrowers are not afraid of credit. They are afraid of making the wrong first move.”
What this means for India’s credit future
With such a high share of first‑time borrowers coming from Gen Z, the way this generation uses and repays its early loans will heavily influence the quality and direction of India’s retail credit growth over the next decade. Lenders know that one in three NTC consumers tends to take a second product within 12 months and that nearly half do so with the same institution, which is why they are investing heavily in analytics, education and risk controls to convert early Gen Z relationships into long term, profitable and low NPA franchises. For policymakers and advisors focused on inclusive growth, that makes hand‑holding first‑time borrowers through their initial credit choices a priority, not an optional extra.
In 2026, the most successful Gen Z borrowers will likely be those who treat their first loan as a signal to the entire financial system rather than just a quick fix. Working with informed intermediaries, they can choose safer products, keep limits aligned to income, and build a repayment record that opens doors to affordable home, education and business finance by their early 30s instead of closing those doors with early missteps. In a country where youth, women and small town consumers are now at the heart of new‑to‑credit growth, getting that first move right is not just a personal win; it is a cornerstone of India’s broader financial inclusion story.
