Credit markets in India and the United States have the same basic purpose—to help people and businesses get money when they need it. But these systems are organized and regulated very differently.
In India, expanding access to finance over the past two decades has been largely promoted by the government. Large state banks and new digital services such as UPI have been actively involved. In the US, consumer credit has evolved around private banks, credit card companies, and long-established credit bureaus. These differences are important because it is the rules, the cost of borrowing, and even attitudes toward debt that determine how families in different countries manage their finances.
Historical Development of the Indian and American Credit System
India’s credit system developed gradually, reflecting the country’s social and economic goals. After independence, an important step was the nationalization of the largest banks in 1969, followed by another wave in 1980. This allowed more resources to be directed toward priority areas—above all, agriculture and small businesses. In the 1990s, the focus shifted to microfinance: for the first time, the SHG-Bank Linkage program gave rural families, united in groups, access to loans that had previously been out of reach.
From the early 2000s, credit bureaus began to emerge in the country, with CIBIL playing a key role. At the same time, authorities strengthened oversight of non-banking organizations, seeking greater transparency in the market. The turning point came in 2010: the Jan Dhan program enabled millions of people to open bank accounts, Aadhaar simplified identification, and the UPI system made instant digital transfers possible. For many, this was their first experience with banks. In 2022, the Reserve Bank of India took further action—introducing strict rules for digital lending and tightening supervision over the non-banking sector to mitigate the risks associated with unsecured loans.
With the US credit system, the situation was different. After World War II, consumer credit began to grow, and by the 1950s and 60s, credit cards had already become a normal part of life. To protect borrowers, Congress passed the Fair Credit Reporting Act (FCRA) in 1970. In 1989, the FICO score was introduced, quickly becoming the main tool for assessing creditworthiness. The 2008 financial crisis led to significant reforms, including the adoption of the Dodd-Frank Act and the establishment of the Consumer Financial Protection Bureau (CFPB) to oversee markets for credit cards, mortgages, and personal loans.
Credit Scoring Models and Their Differences
In India, credit scores run from 300 to 900 and are issued by four main bureaus: CIBIL, Experian, Equifax, and CRIF High Mark. A score above 750 is typically considered a strong score. These ratings are based on data from banks and non-banking financial institutions; however, many individuals still have thin or incomplete credit histories. To address this, the Reserve Bank of India is promoting the Account Aggregator system, which enables borrowers to digitally consent to share their financial information and, in turn, strengthen their credit profile.
In the United States, credit scoring is dominated by FICO and VantageScore. Both use a scale of 300 to 850, but they rely on different methods and weighting systems. The latest versions, FICO 10T and VantageScore 4.0, now factor in rental and utility payments, making it easier for more people to be included in the credit system. Mortgage lenders are gradually adopting these updated models, a sign of just how central credit scoring remains in the U.S. loan process.
Role of Banks and Financial Institutions
In India, credit is mainly shared between commercial banks and non-banking financial companies (NBFCs). Large banks continue to dominate in areas such as housing loans and big retail products, while NBFCs hold a strong position in personal loans, vehicle finance, and microfinance. To keep this system in balance, the Reserve Bank of India (RBI) applies what’s known as a “scale-based regulation” framework. In practice, this means that the larger and riskier an NBFC is, the stricter the requirements it must meet. Regulators note that, overall, banks and NBFCs remain in stable condition. However, they’ve raised concerns about the rapid expansion of unsecured retail credit, which could become a risk if left unchecked.
In the United States, banks are still central to lending, but the market is far more fragmented. Much of the lending originates from specialist lenders, including mortgage companies, auto loan companies, credit card issuers, and, more recently, buy-now-pay-later providers. Oversight is also spread across multiple bodies: the Federal Reserve, OCC, and FDIC regulate banks, while the Consumer Financial Protection Bureau (CFPB) is responsible for enforcing consumer protection laws across the financial sector. Compared to India’s model, where a single central authority (the RBI) oversees both banks and NBFCs, the U.S. system is more decentralized, with different agencies handling separate mandates.
Digital Lending and Fintech
India’s UPI has transformed retail payments and is now expanding into credit by directly linking pre-approved credit lines to payment apps. By July 2025, it had processed nearly 19.5 billion transactions, demonstrating its widespread adoption. Alongside UPI, digital lending platforms are expanding quickly, offering small, urgent loans online—often within minutes. These services are especially useful for individuals facing unexpected expenses who may not qualify for traditional bank credit. To manage risks, the RBI introduced digital lending rules in 2022–2023, requiring full fee transparency, disbursal only through the lender’s account, and tighter oversight of bank–fintech partnerships.
In the U.S., fintech growth has centered on Buy Now, Pay Later (BNPL) and cash advance platforms. While many began outside the banking system, regulators are pulling them under consumer-protection standards. In May 2024, the CFPB ruled that BNPL providers must offer dispute and refund rights similar to credit cards under Regulation Z. This step brings digital credit closer to traditional lending standards and reduces consumer risk.
As Latoria Williams, Founder & CEO of 1FirstCashAdvance, puts it: “Online lending platforms have become an important link between households and the formal credit system. When offered transparency and proper oversight, they enable families to handle emergencies without incurring long-term debt. The focus must remain on clear disclosures and responsible underwriting so that convenience never comes at the expense of consumer protection.”
Regulatory Frameworks and Consumer Protections
In India, secured lending is governed by rules from the RBI and laws such as the SARFAESI Act. The RBI also operates an Integrated Ombudsman Scheme, which consolidates dispute resolution for both banks and non-bank lenders. In 2022 and 2023, new digital lending rules were introduced. They banned direct payments to intermediaries, required lenders to clearly disclose all fees, and established standards for how fintechs and lenders handle First Loss Default Guarantees.
In the U.S., consumer credit is shaped by a few key laws. The Truth in Lending Act (Reg Z) requires lenders to explain interest rates and fees. The Equal Credit Opportunity Act (Reg B) prohibits discrimination in lending. The Fair Credit Reporting Act controls how credit bureaus handle your data, and the Fair Debt Collection Practices Act (Reg F) sets limits on debt collectors, including how often they can call and the ways they can contact borrowers. All of these rules are enforced by the CFPB, which acts as the main consumer watchdog.
Availability and Use of Credit Products
In India, people mainly rely on personal and home loans. In the past few years, digital credit through UPI and fintech apps has also grown rapidly, demonstrating the continued expansion of retail lending. Still, regulators are keeping a close watch on unsecured loans, since this part of the market is growing faster than any other. Gold-backed loans continue to be a key product, partly due to cultural preferences and also because they are perceived as safe, being secured by a tangible and valuable asset.
The situation in the United States looks very different. By mid-2025, household debt had reached about $18.4 trillion, driven by heavy use of mortgages, auto loans, student loans, and credit cards. Online credit companies, such as 1F Cash Advance, are also seeing increased demand, offering quick access to cash for urgent needs, often without requiring a credit history. Credit card debt, in particular, has been rising sharply, with balances and delinquencies now higher than before the pandemic. In the U.S., credit cards play a dual role: they are both a convenient payment method and one of the most common forms of revolving debt.
Repayment and Default Culture
In India, retail loan non-performing assets are still low, about 1.2% in 2024, but regulators are increasingly worried about the rise in unsecured lending. Defaults not only lower CIBIL scores but also make it harder for borrowers to qualify for new credit. For secured loans, the SARFAESI law allows lenders to enforce recovery more quickly.
In the U.S., repayment trends tend to move with the broader economy. By 2024–2025, delinquencies on credit cards and auto loans had climbed above pre-pandemic levels. When borrowers default, debt collection is carried out within the limits set by the FDCPA, but the bigger impact often comes from the hit to credit scores, which raises the cost of future borrowing.
Borrowing Culture and Social Norms
People in India have used loans cautiously to this day. Many people still choose to borrow from loved ones, especially if the amount is small. In rural areas, approximately one-third of household debt still originates from informal sources, such as moneylenders. With Indians more likely to turn to family for help, they are minimizing their spending. But this also limits credit history building.
In the United States, credit is the norm. Most households use credit cards, and debt on them is a common occurrence. Besides, Americans need a credit history, so the culture encourages early and consistent use of formal credit.
Cross-Border Lessons for Sustainable Borrowing
India could gain from clearer, TILA-style disclosure standards applied to all forms of credit, including digital loans. The wider use of consent-based data through the Account Aggregator system could also help thin-file borrowers access the formal credit market.
The U.S., in turn, could take lessons from India’s UPI, which shows how instant payment rails can drive financial inclusion at scale. For both countries, the challenge now is to strengthen oversight of BNPL and other emerging products, while also investing in financial literacy—helping Indian households move from informal to formal credit, and guiding U.S. consumers toward more sustainable use of revolving credit.