Digital lending is rapidly expanding across India, with smaller towns and cities showing greater adoption than large metros. Despite a high level of digital payment usage, consumer trust in digital loan applications remains surprisingly low. However, trends indicate a closing gender gap in digital credit access, suggesting economic opportunities are key to bridging this divide. The Digital Credit & Inclusion Index highlights these evolving trends, underscoring the need for policy to keep pace with evolving financial behaviors.

Digital lending is rapidly expanding across India, with smaller towns and cities showing greater adoption than large metros. Despite a high level of digital payment usage, consumer trust in digital loan applications remains surprisingly low. However, trends indicate a closing gender gap in digital credit access, suggesting economic opportunities are key to bridging this divide. The Digital Credit & Inclusion Index highlights these evolving trends, underscoring the need for policy to keep pace with evolving financial behaviors.

Digital lending is rapidly expanding across India, with smaller towns and cities showing greater adoption than large metros. Despite a high level of digital payment usage, consumer trust in digital loan applications remains surprisingly low. However, trends indicate a closing gender gap in digital credit access, suggesting economic opportunities are key to bridging this divide. The Digital Credit & Inclusion Index highlights these evolving trends, underscoring the need for policy to keep pace with evolving financial behaviors.

Borrowing money digitally is growing faster in India's smaller towns than the big metros. Yet, there is a paradox — while India is a big adopter of digital payments, confidence in such ‘loan apps’ trails behind.

In fact, consumer confidence in borrowing money digitally stands at only 52 per cent — way behind the 74 per cent when it comes to spending money digitally.

However, the trends indicate digital borrowing is also picking up, particularly in smaller cities. Tier 2 cities in India recorded an average score of nearly 58 on the Digital Credit Index, compared with 53 for Tier 1 cities.

This is based on the Digital Credit & Inclusion Index (DCII), which was announced at the Global Fintech Festival in Mumbai last week. The Index was developed jointly by Amazon and the public policy think tank Pehle India Foundation (PIF). It intends to keep track of digital money usage trends across the country, to examine who can access digital credit, how it is being used and whether it helps improve the financial security of citizens.

Along with the larger adoption of borrowing through digital apps in second-tier cities compared with metros, the gender gap also appears to be narrowing rapidly. While male users scored higher than women overall, salaried women scored 62, ahead of salaried men who came in at 60.

According to a statement issued by the PIF, the gender gap is narrower among younger respondents, too. “Together, these findings indicate that access to formal economic opportunity can do more to close the digital credit gap than digital familiarity alone,” the note said.

“Evidence of this kind must anchor policy, not trail it,” said PIF chairman and former NITI Aayog chairman Dr Rajiv Kumar, adding, “The DCII gives us a reproducible measure of how digital credit is being accessed, adopted and experienced. I am confident it will serve as a valuable input for policymakers, regulators and industry alike, and evolve as an annual benchmark for India’s financial inclusion journey.”

Yet, the increasing usage does not hide the fact that consumer perception about digital borrowing has not kept pace with access. While the index of people confident of borrowing money from apps stands at 52.5, the number rises to 74.4 when it comes to using the same avenue for digital payments.

In fact, nearly half of the 5,000-plus respondents surveyed for DCII across 100 cities in 20 states of India said that they relied on their own savings when they last faced a cash shortfall. Only 6.9 per cent used loan apps while 3.4 per cent resorted to using ‘Buy Now, Pay Later’ options. PIF noted that “digital credit may be easier to access, but it is not yet the financial cushion most people turn to when they need one…. Access and use have advanced faster than the financial benefits people derive from digital credit.”

“India’s world-class digital payments infrastructure has transformed how millions transact. As Prime Minister Narendra Modi highlighted at the Global Fintech Festival, the opportunity now is to build on this foundation and expand financial services beyond payments into credit, insurance, savings, investments and pensions, particularly for underserved communities. The Index will serve as a benchmark to map India’s progress on digital credit inclusion over time—tracking not just access and adoption, but whether digital credit is translating into meaningful financial progress.”

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