India’s personal finance landscape is witnessing a sharp behavioural split. On one side, Gen Z is increasingly borrowing to fund lifestyle choices such as travel and premium gadgets. On the other, long-term investments through mutual funds and SIPs are accelerating at an unprecedented pace, signalling growing financialisation of household savings.
According to recent data, 27% of personal loans taken in the first half of 2025 were used for travel, marking the first time in India’s financial history that leisure emerged as the top reason for unsecured borrowing. Investment banker and author Sarthak Ahuja flagged the trend in a LinkedIn post, calling it a clear departure from earlier generations who borrowed primarily for medical emergencies, home renovations, or asset creation.
“For the first time in India, the number one reason to take a personal loan is not an emergency or an asset—but travel,” Ahuja wrote, pointing to what he describes as status-driven consumption among younger borrowers.
The shift is being amplified by fintech-led lending models. Zero-cost EMIs, Buy Now Pay Later options, and instant loan approvals—often under ₹50,000 and processed in under a minute—have made borrowing frictionless. This has encouraged Gen Z consumers to finance airline tickets, expensive concerts, and smartphones, with nearly 70% of iPhone sales now reportedly happening via EMIs.
The pressure is not limited to discretionary spending. Data also shows that 39% of Gen Z borrowed in 2024 to meet basic expenses such as rent, groceries, and utility bills, underlining rising financial stress alongside aspirational spending.
Ahuja attributes this behaviour partly to sky-high housing prices, which have pushed home ownership out of reach for many young Indians. Faced with the prospect of paying EMIs of ₹2 lakh a month for decades, many opt instead for short-term gratification—travel, lifestyle experiences, and social media visibility.
The trend mirrors—but also contrasts with—China’s recent experience. Chinese Gen Z consumers borrowed aggressively between 2015 and 2019 for status purchases. Post-pandemic economic uncertainty, however, has driven a sharp reversal, with young savers turning towards gold—particularly one-gram “gold beans”—as symbols of financial prudence.
“While Indians are thinking I should borrow today because I will earn tomorrow, Chinese youth are thinking let me save today because I may not have a job tomorrow,” Ahuja noted.
Even as lifestyle borrowing rises, India’s mutual fund industry is expanding rapidly, pointing to a parallel shift towards structured long-term investing. Assets under management (AUM) climbed to ₹81 trillion in November 2025, up from ₹68 trillion a year earlier, registering 18.69% year-on-year growth, according to a report by ICRA Analytics.
Over the past five years, the industry’s AUM has nearly tripled, posting a CAGR of 21.91%, driven by sustained net inflows, strong equity market performance, digital adoption, and deeper retail participation.
By May 2025, AUM had crossed ₹70 trillion and surged past ₹80 trillion within six months, despite global economic uncertainty. Market participants believe the industry could cross ₹100 trillion within the next few years if current trends persist.
“The domestic mutual fund industry has shown resilience backed by optimism around India’s economic growth prospects,” said Ashwini Kumar, Senior Vice President and Head of Market Data at ICRA Analytics.
Systematic Investment Plans (SIPs) have emerged as a major growth engine. By November 2025, SIP AUM reached ₹16.53 trillion, accounting for over 20% of the industry’s total assets. The rise reflects growing financial awareness and disciplined investing among households, particularly in smaller towns and among first-time investors.
Equity funds continue to dominate inflows. Open-ended equity fund AUM quadrupled over five years—from ₹9 trillion in November 2020 to ₹36 trillion in November 2025. Flexi-cap funds recorded strong year-on-year growth, followed by multi-cap and large-and-mid-cap categories. Small-cap funds delivered the highest long-term returns, with a five-year CAGR of 24.91%.
Together, the two trends reveal a complex picture of India’s evolving financial behaviour. While easy credit and lifestyle aspirations are pushing younger consumers toward short-term borrowing, long-term investing through mutual funds and SIPs continues to deepen across the economy.
As Ahuja cautions, social media-fuelled displays of wealth may not always reflect financial strength. “If you’re getting jealous of someone’s holiday or iPhone online, don’t be,” he wrote. “It could be on borrowed money.”
At the same time, the steady rise in mutual fund participation suggests that a growing section of India is quietly building long-term wealth—one SIP at a time.