Delay in loan repayments and defaults across fintech lenders has halved from its peak of 4.83 percent in September 2021 to 2.26 percent in March 2022, according to data in the Reserve Bank of India's (RBI) annual Financial Stability Report (FSR).
According to the data by credit information company TransUnion CIBIL quoted in RBI's FSR, fintech delinquencies were higher than that of private sector banks and non-banking financial companies (NBFCs) or housing finance companies (HFCs) during the peak in September last year.
As per data for March this year, delinquency levels in NBFCs and HFCs stand higher at 2.34 percent, while private bank defaults are far behind at 1.40 percent.
The data is based on repayments due past 90 days, which in banking are categorised as Non-Performing Assets (NPAs). TransUnion CIBIL’s fintech category comprises NBFCs registered with RBI and active in the digital lending category, as well as peer-to-peer lending platforms.
The report also said that the demand for consumer credit, which was consistently trending upwards after the second wave of the pandemic, has moderated in the first quarter of FY23. The declining trend in credit active consumers is also persisting, across categories.
Further, the report reiterated RBI's stance that fintech has exposed the banking system to new risks, and the presence of Big Techs like Apple, Google, Meta, Amazon, etc in fintech has increased risks to financial stability.
These Big Techs entered the financial domain mainly as payment service providers but are now offering a host of financial services including credit, asset management, insurance, crowdfunding, etc.
The report said, "They increase financial stability risks a) by bundling several financial activities through their platforms; b) increasing operational interconnectedness with financial incumbents through the provision of technological support via outsourcing partnerships; and c) greater financial interconnectedness with financial incumbents."
According to RBI, regulators need to be mindful of the new interlinkages that Big Techs might create with the existing financial institutions.
According to RBI data, Indian fintechs received funding of $8.53 billion in FY22.
In the past year, fintech lending platforms saw tremendous growth fuelled by increased digitisation, low-interest rates, and excess liquidity making partner banks and NBFCs lend more aggressively.
With the change in the interest rate scenario and RBI's measures to pull back liquidity, lending is also expected to slow down.
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