As banks turned cautious following repeated warnings from the regulator, fintechs wooed away most personal loan borrowers in the first half this fiscal.
These new-age lenders took away around 76 percent of the personal loans sanctioned between April and September 2024, clocking a 9 percentage point rise over the same period in FY24.
While fintechs saw a growth of 0.35 percent in volume of personal loans disbursed during the first half, banks registered a decline of 21 percent in the same period. In value terms, too, banks saw a decline of 30 percent on-year.
The data is analysed from a report published by the Fintech Association for Consumer Empowerment (FACE), an RBI- recognised self-regulatory organisation in the fintech sector (SRO-FT). The data analysis was done for FACE by credit bureau CRIF High Mark.
“The decline of share of the banks in lending volume has been because of the regulator's call asking for restraint on the large institutions' exposure to unsecured lending. The growth has been declining for the fintechs too and the AUM has dropped too,” said an analyst, who did not wish to be identified.
The average value of a loan disbursed by fintechs was around Rs 9,200, indicating the predominant share of small-ticket loans. For banks, it stood at Rs 4.4 lakh in the first half of FY25.
The value of fintech loans was only 12 percent of the total loan disbursement during the first half of FY25. The value of banks' share in the total sanctioned loan value stood at 61 percent.
“While this is a positive sign for the borrowers who are usually ignored by banks. It remains to be seen if the central bank will be unhappy with the fintechs as the regulator has been concerned with the indebtedness of the segment of borrowers who take loans below Rs 50,000,” said a consultant working with a large audit firm.
Multiple credit bureau reports also suggest that these borrowers have been taking multiple loans.
“People after taking their first PL from a fintech have a higher average number of live PLs. The loans start to pile up as soon as three months from the first sourcing. Within the first 24 months, the average number of live PLs increases to 3.5,” said a report on fintech lending by credit bureau Experian.
The total number of loans disbursed by the fintechs during the first half of FY25 was around 5.3 crore, the value of the loans stood at Rs 49,000 crore, according to the FACE report.
“Fintech NBFCs are remarkably distinct in providing customised and small-value credit to customers across segments to meet various needs. However, there is much diversity, and ticket sizes are higher for customers in metro/urban areas and increase with customers’ age and bureau vintage,” FACE said in the report.
According to the Experian report, fintechs and fintech-enabled platforms or partners disbursed more than 80 percent of all personal and business loans under Rs 1 lakh during the last quarter of FY 24.
While prime customers - or those with high credit scores - get coveted by all the financial institutions, including banks, fintechs still have the upper hand because of the variety of use cases they provide.
“Due to superior customer journey, customers with prime and near prime bureau scores often prefer a fintech as their lender of choice. Most customers go for a personal loan as their next credit and within this segment fintech lenders are the top choice,” the Experian report said.
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