Tier-2 cities lead India’s digital credit inclusion with highest DCII score: Report

Tier-2 cities are emerging as the strongest centres of digital credit inclusion in India, outpacing both Tier-1 and Tier-3 cities, according to the Digital Credit & Inclusion Index (DCII) 2026 launched by Pahlé India Foundation in collaboration with Amazon Pay.

India’s first composite benchmark on digital credit is based on a primary survey of more than 5,000 respondents across 100 cities in 20 states. The index examines access, adoption, trust, borrowing behaviour and the impact of digital credit on financial outcomes, going beyond traditional measures focused largely on payments or loan volumes.

India recorded a national DCII score of 55.85 out of 100, placing it in the “Emerging and Served” category. Access emerged as the strongest pillar at 61.24, followed by Adoption at 57.17. However, Impact stood at 49.16, indicating that greater access has yet to translate fully into stronger financial resilience and savings outcomes.

Tier-2 cities lead digital credit adoption

Tier-2 cities recorded an average DCII score of 58.64, compared with 53.1 for Tier-1 and 55.7 for Tier-3 cities. Coimbatore, Surat, Nagpur, Indore, Prayagraj, Ranchi, Ghaziabad and Ludhiana are among the cities driving the trend.

The findings also point to more balanced participation in Tier-2 markets. The gender gap in digital credit inclusion is just 2.8 points in Tier-2 cities, compared with 9.1 points in Tier-1 cities.

The findings mark a shift from India’s digital payments journey, where Tier-1 cities continue to lead, suggesting that smaller urban centres could drive the next phase of digital credit growth.

MUST READ: ATMs may soon issue RuPay cards instantly, cutting branch visits and delivery wait; check details

Awareness high, but trust lags

Awareness of digital credit is no longer a major hurdle, with 94.4% of respondents aware of at least one digital credit instrument. However, trust remains considerably weaker than for digital payments.

Confidence in digital borrowing stands at 52.5, compared with 69.7 for digital payments, creating a 17-point gap. The finding highlights the need for greater transparency, simplicity and trust in digital borrowing.

Digital credit also remains a limited financial cushion during periods of stress. Nearly half of respondents, or 48.2%, said they turned to savings during their last cash shortfall, while only 6.9% used a digital loan app and 3.4% used BNPL.

Formal employment narrows gender gap

Economic agency is emerging as a key driver of digital inclusion. While men score higher overall, salaried women recorded a DCII score of 62.0, compared with 60.2 for salaried men, reversing the broader gender gap.

The gap also narrows among younger consumers, standing at 2.9 points among those aged 18-29, compared with 4.6 points among respondents aged 60 and above.

The index also identifies a divide among homemakers, gig workers, daily-wage earners and students, whose digital credit inclusion scores are around 11 points lower than those of salaried and business respondents.

ALSO READ: Commercial real estate emerges as a credit hotspot despite higher risk weights: Report

Consumption dominates credit use

Digital credit is primarily being used for consumption, with 59% of respondents using it to purchase electronics and home appliances. Productive use remains lower, reflected in a score of 43.2.

However, frequent users show stronger productive usage, with 64% reporting that they use digital credit productively. The findings suggest that familiarity with digital borrowing could encourage consumers to use credit for longer-term financial goals.

The DCII points to the next challenge for India’s digital finance ecosystem: moving beyond access and adoption to build trust, encourage responsible and productive borrowing, and convert digital credit into measurable improvements in financial resilience.