Fintechs’ personal loans have grown steadily, with such lenders sanctioning over 2-lakh crore loans since April 2018. Driving loan volumes, fintechs comprised a third of overall active personal loans in September 2023 and 62 per cent of sanction volumes in H1 FY24, according to a report by Fintech Association for Consumer Empowerment (FACE).

The report, which analysed data of 71 fintech NBFCs from April 2018 to September 2023, said that fintechs have doubled their market share in personal loan sanctions since FY19. Personal loan sanctions by fintechs grew from 11 lakh loans worth ₹5,907 crore in H1 FY19 to 4.16 crore loans worth ₹40,845 crore in H1 FY24.

“In loans outstanding, the share of Fintech NBFCs is just 5 per cent of the total personal loans outstanding as of September 2023 but accounts for over a third of active loan volumes. In H1 FY24, fintech loans accounted for 10 per cent of the sanction value but 62 per cent of the sanction volume,” it said.

While a low base and post-pandemic recovery led to accelerated growth in the initial years, growth has been normalising in the last few quarters, the report said, adding that the ticket size, bureau vintage and risk chain of these loans is also improving.

Ticket size

Nearly half of the sanction value was to borrowers with ticket sizes of over ₹50,000, with vintage bureau record of over 5 years and mid-low credit risk. In H1 FY24, more than two-third of the sanction value was to borrowers with a bureau vintage of over 3 years, and half the sanctions were to those with a vintage of over 5 years.

Distribution of sanctioned value across credit scores showed that the share of mid-low risk borrowers increased from 36 per cent in FY19 to 59 per cent in H1 FY24. Further, two-third borrowers were under 35 years of age.

The average ticket size was slightly under ₹10,000, with the ticket size being higher for metro urban areas. Ticket sizes also  increased with age, longer vintage, and better credit scores.

“Fintechs, while small in value, are playing a mighty role in furthering financial inclusion. As the digital economy shapes up, fintechs will expand in tandem, playing a pivotal role in customers’ access to formal credit – important for their financial health and resilience. Evolving digital public infra, adaptive regulation, customer preference, and fintechs’ will and ability to serve unmet credit needs, create a conducive landscape for financial inclusion,” said FACE CEO Sugandh Saxena.

The top 10 States accounted for over three-fourths of the outstanding loan value, and top 5 States for over half. While loans were to borrowers across 721 districts representing 35 States/UTs, 108 districts with outstanding value of over ₹100 crore accounted for over two-thirds of the portfolio.

In H1 FY24, more than a third of the sanction value was to borrowers in Tier-III and beyond, accounting for four of every ten loans disbursed. These cities have witnessed a three-fold increase in overall share in sanction value from FY19.