The changing job of credit

The pattern #189

The changing job of credit

Mayank Jain

Head - Marketing and Content

Jan 23, 2026

Hello everyone,

Welcome to the 189th edition of The Pattern, a weekly newsletter where we unpack the latest in finance, tech, and the economy.

Here’s something to think about today: credit is no longer just about growth or ambitions. For many people, it’s becoming a financial response to life’s curveballs. Let’s break it down.

Medical emergencies are now a top reason people borrow

A new research study from Paisabazaar reveals a telling trend: a noticeable proportion of urban Indians are taking personal loans to deal with medical and healthcare costs. Roughly 11% of personal loan borrowers across India said healthcare emergencies were the reason they borrowed; that share rises to 14% in Tier-I cities. In many cases, this is money borrowed for care that simply can’t wait.

Personal loans are unsecured, disbursed quickly, and require minimal documentation, which makes them an obvious option when an unexpected hospital bill hits, even if they’re not designed for medical emergencies.

But what’s striking here is that credit is stepping into a role traditionally played by insurance or household buffers. Instead of borrowing to improve lifestyles or make planned purchases, people are borrowing to manage risk. And that has very different implications for both lenders and policymakers.

From lifestyle spend to financial stopgaps

Beyond healthcare, borrowing is spread across essential household needs, urgent repairs, and income-related pressures. Nearly half of borrowers surveyed cited essential expenses, while only a little over a third pointed to lifestyle or aspirational spending.

This means unsecured portfolios are increasingly exposed to stress-linked demand, not just planned consumption. For lenders, that has direct implications for underwriting, early-warning signals, and collection strategies.

Regulation is tightening as credit use becomes more fragmented

As credit demand spreads across more use cases and more lending channels, regulators are also stepping up scrutiny. Recent RBI action on priority sector lending (PSL) — including mandatory third-party audits to prevent misreporting — reflects concerns around classification, data quality, and oversight in an increasingly complex lending system.

Even though PSL sits in a different part of the credit ecosystem, the underlying message is similar: when credit is flowing through many intermediaries and into diverse borrower needs, weak reporting and loose controls can quickly turn into systemic risk. The aim isn’t to curb growth, but to ensure it’s being monitored and managed more carefully.

The bigger picture

What all of this really points to is a change in what the credit system is being used for.

When personal loans start covering hospital bills, household gaps, and income pressures, they begin to mirror how stable (or not) everyday finances actually are. That also makes loan books more exposed to things like medical costs, inflation, and job uncertainty, which don’t always show up clearly in traditional credit scores.

At the same time, regulators are making it clear that as lending spreads across more players and more digital channels, clean data and proper reporting matter as much as growth itself.

For lenders, that means thinking harder about where demand is coming from, not just how fast it’s growing. And for policymakers, it raises uncomfortable questions about how often credit is filling in where protection systems fall short.

The story now isn't just about how much people borrow anymore. It’s why.

Reading list

That’s all for this week. See you next time!

If you liked this edition, please forward it to friends, colleagues, and your network. Do encourage them to subscribe as well. You can also follow FinBox on LinkedIn and myself on X to keep up with all the updates.

Cheers,
Mayank

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