India’s Gen Z Debt Surge: RBI Alarmed by BNPL & Credit Card Use

India’s younger generations are increasingly relying on consumption-led borrowing, encompassing credit cards, personal loans, and buy-now, pay-later (BNPL) products. This accelerating trend is actively raising concerns for the Reserve Bank of India (RBI) regarding household debt accumulation.

Rising Consumption Loans Drive Household Debt

Non-housing retail loans now comprise over half of India’s total household borrowings, demonstrating a faster growth rate compared to other loan categories. This shift highlights a significant reliance on credit for immediate consumption, according to Ministry of Finance data.

Key Debt Figures

• Average outstanding debt per borrower increased from Rs 3.41 lakh crore in March 2018 to Rs 4.78 lakh in March 2025.
• Specific categories such as gold jewellery loans and other personal loans have experienced sharp increases in uptake.

Younger Borrowers and Unsecured Lending

The RBI is particularly monitoring household debt among lower-rated and younger borrowers, despite the overall financial system risk remaining contained. Unsecured personal loans, especially small-ticket ones from fintech firms, are a focal point due to their higher risk profile.

Delinquency Rates and Demographics

• Unsecured personal loans show higher delinquency rates of 6.4% as of March 2026.
• Approximately half of these specific loans are extended to individuals under the age of 35.
• Nearly one-third of India’s credit-active population holds some form of loan, with almost half of these being consumption-oriented.

Younger generations are entering the credit system much earlier, often by their early twenties, a departure from previous demographic patterns. This early engagement is driven by a “live now, pay later” approach to finance lifestyle experiences.

The “Live Now, Pay Later” Mentality

This mentality fuels spending on items like music concerts and travel, with many Gen Z attendees using credit cards for purchases. Music concerts alone contributed an estimated Rs 1,600-2,000 crore in spending over 24 months.

Many young individuals are willing to allocate a large portion of their monthly income towards such experiences. This prioritisation of immediate consumption over asset creation is a key concern for policymakers, even if the individual loan amounts are relatively smaller.

Asset Quality Concerns

• The asset quality of unsecured retail lending has weakened.
• The gross non-performing asset (GNPA) ratio for this segment reached 1.8% in March 2026, increasing from 1.2% in March 2025.

The continued growth of consumption-led borrowing among younger demographics, particularly for lifestyle expenditures, presents an evolving challenge. The RBI’s close watch underscores the need to balance credit access with financial stability amidst these changing borrowing habits.