How India Borrows 2024: Aspirational Loans, EMI Cards & Mobile Banking Soar

By Gloria Methri

A fresh financial perspective is sweeping across lower-middle-class consumers in India. Instead of borrowing for basic needs, consumers are now looking to finance aspiration-driven goals. According to the ‘How India Borrows 2024’ study by Home Credit, borrowing is increasingly focused on lifestyle upgrades, entrepreneurial ventures, and home improvements among Indians.

Compared to 2020, loans for consumer durables like smartphones and home appliances have surged from 1% to 37%, reflecting an enthusiasm for tech and lifestyle enhancements.

Additionally, loans for business purposes have grown significantly, making up 21% of all borrowing—a stark rise from just 5% in 2020. This uptick points to a thriving entrepreneurial spirit within the lower-middle-class demographic, backed by government initiatives and MSME credit schemes. The trend extends to home improvement loans, signalling a long-term commitment to raising living standards and investing in stability.

Rising Digital Adoption

Digital finance tools are gaining momentum among lower-middle-class consumers, with app-based banking now used by 65% of this segment, particularly Millennials and Gen Z. This tech-savvy shift is particularly notable in urban and Tier 2 cities.

Ashish Tiwari, Chief Marketing Officer of Home Credit India, points out that “this shift in borrowing patterns and digital engagement highlights the evolving financial aspirations of consumers, who are now increasingly comfortable with digital finance tools, from app-based banking to WhatsApp payments.”

EMI Cards and Embedded Finance: Growing Preferences

Quick-access credit solutions like EMI cards and embedded finance have become popular options. According to the study, 43% of borrowers now favour EMI cards for their speed and accessibility. In comparison, 64% of respondents show a strong preference for embedded finance, often available on eCommerce and travel platforms. These options are ideal for consumers seeking quick, hassle-free financing for small purchases without the traditional wait times and paperwork associated with loans.

Continued Trust in Physical Branches

Despite the growth of digital channels, physical branches continue to play a vital role. Particularly in Tier 1 and Tier 2 cities, consumers prefer the assurance of face-to-face interactions, reflecting a mix of trust and comfort with traditional banking models. This indicates that while digital channels are expanding, physical branches remain key for specific needs and customer segments that value direct interaction.

Data Privacy Concerns Amid Digital Growth

With the rise of digital finance, data privacy has become a prominent concern for borrowers. The study reveals that 58% of consumers feel uneasy about data collection by lending apps. However, only 24% are aware of existing data protection standards, suggesting a gap in consumer education. This sentiment highlights the need for more transparent communication and more robust data protection measures to ensure that consumers feel secure while engaging with digital finance platforms.

Supporting Financial Inclusion

The How India Borrows 2024 study, conducted across 17 cities with a sample size of around 2,500 respondents, sheds light on the shifting landscape of financial priorities and challenges for India’s lower-middle-class consumers.

The findings underscore a future in which financial services increasingly align with the aspirations of the lower middle class, providing tools that not only meet immediate needs but also support long-term goals and digital empowerment.