New Delhi [India], August 20: In India, a two-wheeler is rarely just a ride, it’s often a livelihood, a bridge to opportunity, and, in many cases, a borrower’s very first handshake with the formal credit system. Unlike high-value loans that cater to the few, two-wheeler financing meets people where they are, at the intersection of aspiration and necessity. What makes this space transformative is not just the speed of disbursal or the growth in volumes, but the quiet revolution it’s powering, of helping millions become visible to the financial ecosystem, one engine starts at a time.
The scale of India’s two-wheeler ecosystem is nothing short of transformative. In FY24 alone, sales surged by 13%, touching nearly 18.5 million units, a testament to their enduring relevance across urban and rural India. With close to half of these purchases financed through loans, and the vast majority still petrol-powered, two-wheeler credit has emerged as a cornerstone of mass-market lending. These small-ticket, short-tenure loans are not just about mobility, they’re helping millions of first-time borrowers take their first step into the formal credit system, establishing credit bureau footprints and unlocking future financial opportunities.
This surge in financing isn’t just fueling mobility, it’s a powerful catalyst for broader financial inclusion, driving grassroots-level impact that will define the next chapter of India’s economic story in the years to come.
The Foundation of Formal Finance
A significant portion of India’s workforce, especially migrants, gig economy workers, small traders, and entrants to the labour force face challenges entering the formal credit market. The traditional requirements of extensive paperwork and collateral often exclude them.
Two-wheeler loans offer a practical entry point into the formal credit system. With minimal documentation and quick approval processes, they frequently serve as the initial financial product that is accessible to underserved borrowers. Crucially, successful repayment of this first loan lays the foundation for a credit history, an essential steppingstone for unlocking future, larger opportunities.
Consider the trajectory, a modest loan of Rs. 60,000–Rs. 90,000 for a two-wheeler can gradually evolve into a robust financial identity. Timely repayments are diligently reported to credit bureaus, helping borrowers build a credit score, which is now indispensable for everything from availing a home loan to financing education or working capital for a small business. In essence, a two-wheeler loan becomes the borrower’s critical first formal engagement with India’s sophisticated financial ecosystem.
Leveraging Data for Democratising Credit Access
A significant portion of two-wheeler loan applicants fall under the new-to-credit segment, individuals without a formal borrowing history, often invisible to traditional credit assessment models. To bridge this gap, lenders are increasingly turning to alternate data sources such as telecom usage, digital payment footprints, utility bill patterns, and even GPS-enabled behavioural insights. When combined with advanced analytics and machine learning algorithms, this data enables more nuanced, real-time risk assessment, even in the absence of bureau scores. Technology is playing a critical role in this transformation, from API-driven integrations and eKYC to AI-led credit engines that allow faster, more accurate decisions. The result is a lending ecosystem that is not only more inclusive, but also more secure, scalable, and tailored to the evolving profile of India’s emerging borrowers.
Bridging the Urban-Rural Divide
In India, the informal economy accounts for over 80% employment of the workforce and this is largely concentrated in the Tier-2 and Tier-3 towns, and rural areas. In these regions, two-wheelers aren’t seen as a luxury but a necessity, for commuting to work, transporting goods, or accessing education and healthcare. They significantly boost daily productivity. Moreover, when purchased through formal financing, two-wheelers can serve as a crucial gateway for households to access broader financial services and infrastructure.
In regions with low financial literacy, taking on an EMI instills borrowers with a practical sense of financial discipline and awareness. They become familiar with concepts like credit scores, interest rates, and repayment schedules. This grassroots-level financial awareness lays the foundation for long-term financial stability.
The Road Ahead
As India moves steadily toward its aspiration of becoming a USD 5 trillion economy, credit inclusion must transition from a social imperative to a national economic strategy. Two-wheelers long considered tools of mobility are now emerging as critical enablers of financial identity. For millions from underserved and informal segments, a two-wheeler loan is often the first formal credit touchpoint, a gateway to building bureau footprints and unlocking long-term access to financial services.
This evolution comes at a time when 160+ million Indians remain outside the formal credit system, and over 60% of rural adults have limited or no credit history. To truly democratise access, there is a growing need to widen the lens of credit assessment. This means integrating alternative data more meaningfully into underwriting frameworks, including utility payments, mobile recharges, digital wallet activity, and behavioural insights from device usage. Regulatory push will be vital here, encouraging credit bureaus to partner deeper with NBFCs and fintechs, standardising access via Account Aggregators, and expanding platforms like Jan Samarth to include small-ticket, short-tenure loan data.
The demand environment is equally compelling. With rapid urbanisation, an expanding working-age population, and rising fuel efficiency in new two-wheeler models, the segment is poised to cross 20 million units in annual sales within the next few years. Financing is the bedrock of this growth, nearly 50-55% of all two-wheelers sold today are loan-financed. Access to affordable EMIs, paperless onboarding, and flexible repayment options has made vehicle ownership possible for households that previously operated in cash-only economies.
Looking ahead, the momentum must be anchored by conscious lending, progressive policy, and inclusive use of technology. Embedded credit education, digitally verifiable income proxies, and instant decisioning are no longer optional, they’re essential to build trust and scale among new-to-credit borrowers. Two-wheeler financing may be small in ticket size, but its role is disproportionately large in shaping India’s financial inclusion narrative.
By enabling this journey, India is not just fueling mobility, it is nurturing a generation of credit-aware citizens who will power the next phase of economic transformation.
By Vivek Singh, CEO, Home Credit India
