The loan disbursement of below Rs 50,000 ticket size has grown five times in the last two financial years, a report by the CRIF India shows. As per the report, the trend is seen in low-income families and borrowers are opting for personal loans for consumption needs and not for emergency purposes.
As per the CRIF India report, the small-ticket personal loans are primarily driven by non-banking financial companies (NBFCs) and fintech startups.
“NBFCs and neo-age lenders or fintechs are increasingly targeting young, low-income, digitally-savvy customers who have small-ticket and short-term credit needs, and no or limited credit history—customers who are generally avoided by the incumbents because of their high perceived risk," the report said.
As of March 2020, the report shows that more than 50 percent of volume share in small loans is of Rs 5000 or less segment which is a strong indication that the concept of checkout finance and payday loan is catching up.
As per the loan disbursal trends by age of the borrower, it is seen that personal loans demand is largely being driven by millennials and young borrowers in the age group 18-30 years with an increase in share from 27 percent to 41 percent in annual originations in the last 2 years.
In FY20, the proportion of loans disbursed to those with income of below Rs 3 lakh has grown over the last three years, reaching 69 percent in new loans in FY20.
In terms of volume, NBFCs continue to grow and have doubled their market share in the last two years, observed at FY2020 end. Their current market share as of August 2020 is 42 percent. Public sector banks and Private banks have lost significant volume share over the last 2 years.
In terms of value market share at the end of FY 2020, there is no significant shift in the last two years for NBFCs.
However, in FY 2020-21, disruptions due to COVID-19 have led to an increase in share of mature borrowers while younger borrowers have demanded lower volume of personal loans.
Due to COVID-19 disruptions, as of August 2020, the personal loans book stood at Rs 5,07,684 crore, having grown by only 0.57 percent over March 2020. In the last two years, the PL book has grown by around 40 percent annually, which dropped to a sluggish annual growth of only 26.4 percent as of March 2020.