India’s Struggle With Lack of Access to Credit

Access to credit has long been a problem to millions of Indians. The World Bank estimates that the country is home to more than 190 million unbanked people and due to a combined effort of various precipitating factors such as low or no education, commercially unviable geographies and lack of language skills, the credit gap is on a steady increase as more financial institutions continue to mark an increased strata of the population as uncreditworthy.

Problem Statement

Incredible India, home to more than 1.38 billion people, has long been at the receiving end of lack of access to formal credit instruments such as loans and credit cards. A TransUnion report in 2019 highlighted that more than 220 million Indians were eligible for a loan; however, only 72 million of them had access to formal credit instruments via banks and other financial institutions.

The Global Findex, a flagship effort by the World Bank, reported in 2017 that the number of unbanked Indians were on a steady decline since the introduction of government programs such as the Jan Dhan Yojana, under which 315 million fresh bank accounts were opened catapulting the banking coverage of 53% of the total population in 2014 to more than 80% in 2017, however, although now more Indians than ever before have formal financial coverage, major financial institutions are still wary of lending to them.

India’s Feet of Clay


One of the most significant journeys financial institutions embark upon to assess the creditworthiness of an individual is by analysing their past credit behaviour. Essentially financial institutions access data on individuals who have accessed credit instruments in the past and their subsequent repayment patterns via credit rating agencies to acquire a clear understanding of whether a person is willing to repay or not. However, since India suffers from a staggering 23% financial literacy and has very few promoters willing to introduce credit instruments to novices, financial institutions are impaired into having no data on a significant portion of the population, thus ultimately marking them as uncreditworthy.

Financial Illiteracy

Second to having a severe shortage of promoters, India is a victim of staggeringly low levels of financial literacy among the population. As per a 2020 report published by the Times of India, the Reserve Bank of India highlighted that only about 24% of the 1.38 billion Indian populace is financially literate.

The lack of financial infrastructure is one thing; however, a complete unawareness of them among the masses is a completely separate issue, with the latter often having more severe negative effects.

While authorities are tackling the issue in urban areas with the introduction of programs like the National Strategy for Financial Education (NSFE) 2020–25, communities in India’s hinterland are greatly resistant to availing the benefits of formal financial instruments due to a lack of education, coupled with lack of awareness.

In a country where the percentage of formal literacy is 74% (as per a 2020 census), having such few people interested in financial literacy is a daunting struggle.

Remedial Measure: A Slither of Hope

However, experts and observers from the international community continue to believe that all hope is not lost in the Indian populace, and research conducted on the problem statement indicates several remedial measures promoters can embrace to heal India in the long run.

Mass Education

As history has demonstrated before, a lot can be achieved through mass education, and the same is true for financial literacy. As a starting point, the government can include a holistic financial curriculum at schools both in urban as well as rural areas to emphasize topics of credit history, loans, investments and savings, with an outlook to nurture the new generation right from the start and assist them in becoming adults who are financially literate.

Use of Digital Media

With more than 300 million Indians expected to join the internet in the upcoming years, promoters can rely on digital media to bridge the gap between formal education and financial literacy. Since a majority of future internet users will already be graduates of formal education, promoters can develop a holistic and simplified delivery method to impart financial knowledge in a manner the audience understands while encouraging a sense of self-paced learning.

For example, more than 64% of Indians speak Hindi as their first or second language and yet most of the financial content available online is in English (which only 18% of India speaks) and thus, promoters can use this opportunity to embrace regional dialects and bridge the pre-existing gap.

The Way Forward

Access to credit is instrumental in not only uplifting the financial state of an individual but of the nation as a whole. As I exhibited in this article, the current situation of credit access in India is grim, however with the right steps, the country can and will be able to progress towards a brighter tomorrow made up of more creditworthy Indians.


  1. Just 33% Of the Indians That Are Eligible For a Loan Have Access to a Bank Account by Business Insider.
  2. The Global Findex Database 2017 by the World Bank.
  3. Jpmorgan Warns That a Consumer Credit Crisis Could Derail India’s Economic Recovery by CNBC
  4. Why Encouraging Literacy in Finance Matters by the Times of India
  5. Why ‘Access to Credit’ Is a Challenge to India’s Financial Inclusion by Outlook Money.



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Arpan Sarma

Arpan Sarma

Simplified Finance for Every Indian.