India has built strong digital financial infrastructure over the past decade. UPI alone processes nearly INR 30 billion transactions annually, and bank account penetration is near universal. Yet, financial resilience remains uneven.The last three years have exposed this gap clearly.
Global disruptions have had a direct and immediate impact on household finances in India. Following the Russia–Ukraine conflict in 2022, edible oil prices rose sharply due to supply constraints. Subsequent geopolitical tensions in the Middle East have kept energy prices volatile, with India continuing to import over 85% of its crude oil requirements. These shocks translate quickly into higher fuel, transport, and food costs.
For large parts of the population, these are not macroeconomic trends, they are monthly budget disruptions. This impact is most visible among India’s informal workforce. Over 90% of India’s workforce is informal (lacks social security benefits), and estimates suggest 40–50 crore individuals remain credit-invisible or thin-file. Their incomes are variable, savings are limited, and there is little capacity to absorb sudden cost increases.
What this segment lacks is not intent, but the ability to absorb even minor financial disruptions. A rise in input cost, a delay in income, or an unexpected household expense tends to show up immediately in repayment behaviour, purchase decisions, and savings continuity. These are not cases of over-consumption; they are early signs of stress in households operating without buffers.
This gap persists despite the availability of alternative data. India’s digital ecosystem captures detailed financial behaviour: UPI transactions, bill payments, recharge patterns, all of which provide signals of income stability and repayment discipline. These signals remain underutilised in mainstream underwriting.
At the same time, credit alone does not address the nature of financial vulnerability. For this segment, risks are overlapping: income volatility, health expenses, and working capital needs. Without protection mechanisms such as insurance or small savings buffers, access to credit can remain insufficient.
As an industry, we have also been too focused on solving for access in isolation. Faster disbursal and wider distribution are important, but they are not sufficient if the product itself is not designed for the volatility of the user’s life. In many cases, the real gap is not whether credit is available, but whether the overall financial construct around that user is durable enough to prevent repeat stress.
The next phase of financial inclusion will require a broader approach:
– Expanding underwriting beyond traditional documentation
– Combining credit with protection and savings
– Designing products aligned to irregular income cycles
India’s financial infrastructure is already capable of supporting this shift. The constraint is not capability, but application.
One encouraging shift is the growing use of behaviour-led underwriting models that assess consistency rather than formality. We are beginning to see lenders and fin techs evaluate users based on transaction patterns, repayment discipline, and utility behaviour instead of relying only on conventional documentation. That is a more practical way to assess financial reliability in a country where large parts of the workforce earn regularly, but not formally.
A large part of the workforce continues to participate in the economy without access to systems that can absorb financial shocks. Expanding access to these systems is not a question of reach, it is a question of design.
While the direction is becoming clearer, execution will determine whether this shift truly reaches those who need it most. The challenge is not just about building better models or launching new products—it is about integrating these solutions into the everyday financial lives of users in a meaningful way.
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One important step is improving how financial institutions interpret risk. For decades, risk has been associated with the absence of formal documentation. However, in the Indian context, the absence of documentation does not necessarily indicate unreliability. Many individuals operate stable, income-generating activities but outside formal systems. Recognising behavioural consistency as a valid indicator of financial reliability can significantly expand access without increasing systemic risk.
Equally important is the role of product flexibility. Financial tools need to move beyond rigid structures and adapt to real-world usage. For example, repayment systems that allow small, frequent payments instead of fixed monthly obligations could better match irregular cash flows. Similarly, linking credit products with built-in safety nets—such as micro-insurance or emergency reserves—can help prevent temporary disruptions from turning into long-term financial stress.
Another critical area is financial awareness. While access and design are essential, users also need clarity on how to use these tools effectively. Simple, transparent communication around repayment, interest, and risk can improve financial decision-making and reduce unintended stress. This is particularly important for first-time borrowers who are entering formal financial systems for the first time.
Collaboration across institutions will also play a key role. Banks, fintech companies, insurers, and policymakers need to work together to create integrated solutions rather than isolated offerings. Financial resilience cannot be built through a single product—it requires a connected ecosystem where credit, savings, and protection function together.
Finally, the focus must remain on long-term stability rather than short-term expansion. Rapid growth in access is valuable, but only if it leads to sustained financial well-being. Measuring success purely through disbursal numbers or user acquisition may overlook whether users are actually becoming more financially secure over time.
India has already demonstrated its ability to build large-scale financial infrastructure. The next step is to ensure that this infrastructure translates into real resilience at the household level. This will require a shift in mindset—from enabling transactions to enabling stability.
Financial inclusion, in its truest sense, is not just about bringing people into the system. It is about ensuring that the system is capable of supporting them through uncertainty, volatility, and change.
