India’s Next Credit Test: Building Culture Before Scale Turns to Strain

India’s consumer credit engine is running hot. Fintech NBFCs sanctioned 10.9 crore personal loans worth INR 1,06,548 crore in FY 2024-25, showing how digital channels now deliver scale once unimaginable.

Approvals arrive in minutes, APIs weave together data, and automated underwriting drives throughput. This velocity is a strength, yet it compresses verification windows and fraud exposure checks. The implication is clear and urgent: when speed and volume outpace controls, pressure quietly builds inside the system.

The Credit Rush’s Blind Spots: What Today’s Models Miss, Where Risks Accumulate

Portfolio mix is shifting in ways headline growth can hide. Industry reports show personal loan originations by value fell 2.9 percent in FY 2024-25 while volumes rose 8.3 percent, pointing to smaller tickets and thinner buffers.

Early stress pockets have widened. Fintech-driven small-value personal loans saw 90+ DPD (Days Past Due) reach 3.6 percent by March 2025, a six-quarter high. Microfinance risk rose as well, with industry data indicating PaR in the 31-180-day bucket doubling year-on-year to 5.4 percent by June 2025.

Controls have not kept perfect step with distribution. Institutions still face visibility gaps on multi-platform exposure, uneven depth of KYC beyond identity, and score-only dependency that underweights forward-looking behaviours.

Credit bureaus’ updates show demand tapering among younger consumers, which complicates growth targets and heightens selection risk if funnels do not recalibrate.

What Breaks If We Ignore It: Portfolio Fragility, Funding Costs, Heightened Scrutiny

System stability looks good in aggregate, yet the tail risks are uncomfortably heavy. A recent regulatory report placed the gross bad loan ratio at 2.3 percent in March 2025, but under severe scenarios it could rise to 5.3-5.6 percent.

Growth is already slowing at the margin. Industry specialists expect credit costs to move up 80-90 bps over two years, reflecting unsecured retail and microfinance stress. This is a clear prompt to prioritise quality over pure expansion.

Building Credit Culture Is an FI Mandate: It Strengthens Margins, Models, And Trust

Credit culture is not a poster on a wall. It is a measurable set of behaviours that improves roll rates and stabilises LGD (Loss Given Default). When financial institutions hard-wire reminders, repayment nudges, and transparent consequence signalling, the compounding effect shows up in lower provisions and smoother recoveries.

Quality has strategic value in a moderating demand cycle. Credit bureaus’ indicator shows younger cohorts pulling back and lenders shifting toward higher ticket secured products. That makes disciplined screening, forward-looking risk flags, and cross-platform exposure checks essential to keep approval rates credible without importing hidden volatility.

Regulatory confidence follows credible process. The regulator’s emphasis on governance, cybersecurity, and robust risk controls places a premium on traceable decisioning. Institutions that can show clean data lineage, explainable models, and live portfolio surveillance gain supervisory trust and better pricing in funding markets.

From Credit Rush to Credit Resilience: The Role of Smart Risk Infrastructure

India’s credit expansion is a national asset. It deserves guardrails that are real, specific, and continuously verified. The near-term task for institutions is to turn speed into safe throughput, and growth into resilient compounding, with early-warning systems that act before the bucket leaks.

ScoreMe’s digital lending platform slots into this need state with decisioning capabilities that go beyond static bureau snapshots. With our platform, institutions can deploy API-first onboarding with deep KYC, bureau triangulation, GST and ITR analytics, and fraud patterning.

The result is cleaner funnels, sharper cut-offs, fewer false negatives in good segments, and fewer false positives that later season into delinquency. ScoreMe is already trusted by over 200 institutions, which reflects performance more than pitch.