The Future of Credit: How India will lend to its next 100 million borrowers

Credit underwriting in India is undergoing a decisive shift from relying solely on physical documents and credit bureau scores to data-driven models that assess real-time digital signals.

The experience of accessing formal credit in India was slow, opaque, and exclusionary over a decade back. Even opening a bank account typically required multiple visits, physical paperwork, and long processing times. For large parts of India, especially in smaller towns and rural areas, the formal financial system felt distant. In its place, informal moneylenders filled the gap, offering costly loans with interest rates often exceeding 50 percent annually. These were transactions built not on transparency, but on personal leverage and limited alternatives.

But that landscape has shifted significantly. The past decade has seen India build one of the most digitally advanced financial ecosystems in the world, where a mobile phone, Aadhaar authentication, and digital documentation are often all it takes to access credit. What was once high-friction and high-cost is steadily becoming seamless, inclusive, and intelligent. The transformation is far from complete, but the direction is unmistakable.

The next frontier of inclusion

India has already brought over 400 million people into the fold of formal finance. But the next 100–200 million borrowers represent a fundamentally different cohort. They are mobile-first, often new to credit, and predominantly located in tier 2 and 3 cities, semi-urban clusters, and rural regions. Many are gig workers, micro-entrepreneurs, first-time traders, small farmers, or self-employed youth. Their borrowing needs are typically short-term and ticket sizes modest, for managing cash flow gaps, or funding urgent personal expenses.

This group doesn't neatly fit into legacy credit scoring frameworks or traditional underwriting models. Their income flows can be uneven and undocumented, and their digital behavior doesn’t always mirror urban lending patterns. But that does not make them uncreditworthy. It simply calls for a rethinking of how risk is evaluated and how credit is extended.

From documentation to data intelligence

Credit underwriting in India is undergoing a decisive shift from relying solely on physical documents and credit bureau scores to data-driven models that assess real-time digital signals. The Account Aggregator framework, CKYC, DigiLocker, and GST-linked data pipes are now enabling lenders to access structured, consent-based financial information across sources. This is especially critical for new-to-credit borrowers who may not have a credit score but do have meaningful cash flow footprints.

Alongside, the rise of UPI Autopay is creating new rails for EMI-linked collections, a sign of repayment becoming programmable, predictable, and traceable at scale.

Embedded credit will lead the next wave

The future of lending will not be confined to banks or NBFCs operating through bank branches. It will be embedded where the consumer already is, whether that’s an e-commerce platform, a digital storefront, or an ecommerce app. Credit will become invisible but present, with the infrastructure working quietly in the background. As with payments, where UPI removed layers of friction, lending too will hinge on seamless discovery and embedded journeys.

This is where marketplaces and aggregators are evolving beyond product comparison engines. Platforms are positioning themselves as end-to-end credit enablers, integrating underwriting, documentation, disbursal, and repayment management through APIs and partnerships. For the borrower, this means more choice, better discovery, and tailored options based on need and repayment capacity.

Credit scores will need to evolve

As lending expands into Bharat, traditional credit scores, while still important, will no longer be sufficient as standalone metrics. A significant portion of the next wave of borrowers will not have deep bureau histories. Yet, many will display disciplined financial behaviour through alternate indicators—such as digital payment records, timely utility bill payments, or savings patterns.

India’s credit bureaus and lending institutions are increasingly incorporating alternative data and behavioural analytics into their models. But more can be done. For example, data refresh cycles need to be faster, credit visibility more transparent to consumers, and scoring frameworks more contextual. Awareness of how credit scores work also remains low in many regions. Public education, combined with more intuitive credit reports, will play a key role in building long-term financial literacy and trust.

A regulatory framework that balances innovation and stability

As this shift accelerates, regulation will need to balance two imperatives: encouraging innovation and ensuring systemic safety. The RBI’s digital lending guidelines in 2022 were a step in that direction, prioritizing transparency and customer protection. But as embedded credit and consent-based data flows expand, frameworks around data privacy, grievance redressal, and digital fraud prevention will need continuous evolution.

An inclusive, intelligent blueprint

The playbook for serving India’s next 100 million borrowers will be defined by a few key principles: low-friction onboarding, dynamic underwriting based on real data, repayment linked to actual cash flows, and trust built through transparency and education. The infrastructure is already in place. What’s needed now is coordinated execution that puts the consumer at the centre.

Equally critical is the continued focus on financial and digital literacy. As products become more sophisticated and embedded, users must be equipped to make informed decisions, understand their repayment obligations, and protect themselves from fraud. The true promise of India’s digital credit revolution will only be realised when its benefits reach the remotest corners of the country.

India’s digital credit journey is not just about loans, it’s about unlocking productivity, enabling small ambitions, and extending a safety net to those who’ve historically been underserved. If we get it right, it could transform not just balance sheets, but lives.