India's fintech firms now occupy 52% of personal loan market

Fintech firms now occupy 52 per cent of the personal loan market. These firms disbursed more than Rs 2,48,000 crore in personal loans and Rs 28,607 crore in business loans as of March 2024, a new report by Experian India says.

The report notes that the estimated loan customer count of fintech companies could grow to nearly 20 crore by 2027, which would be twice the market share they enjoy at the moment, with the right business model and strategies.

A reason for the growing influence of fintechs in the lenders’ market is the sector’s high penetration in categories with low credit access such as Women, New To Credit individuals and borrowers with Sub-Prime Bureau scores, according to the report. The use of latest technologies has helped the fintechs sector to reduce loan approval period. Blockchain technology has, particularly, proved beneficial, because it has helped lower fraud in disbursement.

Green finance that supports sustainable and environment friendly projects is notably an area where fintechs have thrived, the report says, and adds that the sector’s burgeoning reach in the agri-finance sector has been a boon for small farmers.

The personal loan market has seen a marked surge in semi-urban and rural India, notably by 24 per cent in Bihar, 21 per cent in Tamil Nadu and 20 per cent in Uttar Pradesh during the fiscal year 2023-’24, or FY24, according to the report. The rate of growth for business loans in the rural and semi-urban segment during the same period was best recorded in Karnataka (133 per cent), Uttar Pradesh (118 per cent) and Bihar (67 per cent).

The report points out that loans disbursed by fintechs have a higher Non-Performing Asset (NPA) ratio than the industry average, which makes it essential for the sector to have a better risk management strategy — particularly when it comes to overleveraged borrowers, or borrowers with high debt.