Fintechs capture 76% of personal loans as banks slowdown in H1 FY25
New Delhi, Jan 14, 2025
Banks experienced a 21 per cent drop in the volume of personal loans sanctioned, accompanied by a 30 per cent decline in loan value year-on-year, according to a new report
With traditional banks adopting a cautious stance following repeated advisories from the Reserve Bank of India (RBI), fintech lenders have emerged as the top choice for personal loan borrowers in the first half of this fiscal (FY25). These digital-first non-banking financial companies (NBFCs) have leveraged technology and customer-centric models to secure a notable share of the market, even as the sector shows signs of slower growth, according to a recent report by the Fintech Association for Consumer Empowerment (FACE), a self-regulatory organisation recognised by the RBI.
The report highlighted fintech lenders captured approximately 76 per cent of personal loan sanctions by volume between April and September 2024 — a rise of 9 percentage points compared to the same period in FY24. In contrast, banks experienced a 21 per cent drop in the volume of personal loans sanctioned, accompanied by a 30 per cent decline in loan value year-on-year.
The average ticket size for fintech loans stood at around Rs 9,200, dominated by small-ticket loans catering to first-time and underserved borrowers. By comparison, banks reported an average loan size of Rs 4.4 lakh for the same period. Although fintech loans accounted for just 12 per cent of the total personal loan disbursement value in H1 FY25, banks retained a 61 per cent share of the sanctioned value.
During the first half of FY25, fintech NBFCs disbursed around 5.3 crore loans worth Rs 49,000 crore. Despite their strong performance in volumes, the sector witnessed a 10 per cent decline in outstanding loans between June and September 2024, reflecting a slowing growth trajectory, the report noted.
The report also mentions that borrowers under 35 years of age accounted for more than two-thirds of the sanctioned loan value in H1 FY25. Additionally, 85 per cent of the loans were extended to male customers. Tier-III towns and smaller cities represented over one-third of the total sanction value, showcasing fintech’s expanding reach beyond metropolitan regions.
Fintech NBFCs continued to prioritise high-volume, small-ticket loans, ensuring credit accessibility for underserved segments. This customer-focused approach has positioned them as key players in promoting financial inclusion, the report said.
The average loan size of Rs 9,225 reflected that larger ticket sizes are becoming more common among older, urban borrowers with established credit histories, indicating a gradual shift toward a more diverse customer base.
Loans with ticket sizes exceeding Rs 50,000 now comprise more than half of the total sanctioned value. This trend points to a maturing customer profile, with many borrowers possessing a bureau vintage (borrower’s credit history duration, starting from when they first availed credit) of over five years — a sign of increasing trust in fintech lenders among experienced customers.
[The Business Standard]
