Fintech companies have taken a significant 52% share of the personal loan market, as noted in a recent Experian India report.
As of March 2024, fintech companies have disbursed over ₹2.48 trillion in personal loans and ₹28,607 crore in business loans, with many loans under ₹50,000 primarily benefiting New-to-Credit (NTC) individuals. The report highlights that if fintechs maintain their innovative edge and address existing challenges, they could potentially double their customer base to 200 million within the next three years.
The fintech sector’s expansion into rural and semi-urban areas is notable, with personal loan penetration rising by 24% in Bihar, 21% in Tamil Nadu, and 20% in Uttar Pradesh in FY24 compared to FY23. Business loans have seen dramatic growth as well, with Karnataka up by 133%, Uttar Pradesh by 118%, and Bihar by 67%.
Manish Jain, Country Managing Director of Experian India, told the Financial Express, “The fintech revolution in India is just beginning, with tremendous growth potential ahead.”
While fintechs have excelled in reaching underserved segments such as women, NTC individuals, and those with sub-prime scores, they face higher Non-Performing Asset (NPA) ratios compared to the industry average. This underscores the need for enhanced risk management practices, particularly for overleveraged customers.
The report notes a worsening in asset quality in FY23, but anticipates a moderation in FY24 as the vintage curve stabilizes. Fintechs have leveraged advanced technologies like blockchain to streamline loan approvals, enhance transparency, and reduce fraud. They are also pioneers in green finance and Agri-finance, supporting sustainable projects and aiding small farmers. Improved data analytics and credit scoring models are recommended to mitigate risks and further drive fintech growth.
