However, contrary to assumptions that this set of consumers are subprime from a risk perspective, the study by credit information company Transunion Cibil said a bulk of the "Gen Z" have better risk profiles.
The report comes at a time when lenders are increasingly targeting to expand their retail books, and also amid unemployment rising to a four-decade high as per the official data.
The level of credit active at 6 per cent is lower than emerging market peers like Colombia and South Africa, and also among established consumer credit markets like Canada, Hong Kong and the United States, it said.
There are 147 million people between the ages of 18-24 who are eligible for credit and only nine million of them, or six per cent, apply for credit, it said, adding that for the broader adult population, the same level stands at 10 per cent.
In Canada, 63 per cent of the Gen Z is credit active, while in neighbouring USA, the same level stands at 66 per cent, the study said, adding emerging markets peers Colombia (19 per cent) and South Africa (28 per cent) are also ahead.
In a country where public transport services are a worry and gig economy jobs like food delivery services galore, the most popular credit product is the two-wheeler loans, it said. This is followed by consumption products such as consumer durables and unsecured credit cards, it said, adding that the high-value purchases like smartphones, personal computers or laptop, television dominate this field, rather than household appliances like refrigerators or washing machines which is preferred by older generations.
The rate at which new loan accounts are being opened is growing fastest in the consumption lending category, it noted.
From a risk perspective, it said it is a "common myth" that the Gen Z consumers are in the subprime credit tier because they have fewer open credit products and don't have long histories of positive credit repayment. "The majority of Gen Z consumers are not subprime," the study said.
Gen Z is the newest generation born between 1995 and 2015.