Digital loans to customers in Tier-3 cities accounted for 40 per cent of the total digital lending disbursements in FY23, followed by Tier-2 cities comprising 35 per cent loans and Tier-1 cities the remaining 25 per cent.

Maharashtra, Karnataka, Uttar Pradesh, Telangana, and Tamil Nadu were the top States, accounting for 50 per cent of the loans disbursed during the year.

The massive adoption across under served customer segments has been led by strong customer preference for digital loans and regulatory support and clarity coming through digital lending guidelines, according to the Fintech Lending Trends report by FACE (Fintech Association for Consumer Empowerment) and Equifax.

Digital loan disbursements were up 49 per cent year-on-year in terms of volumes and 21 per cent in terms of value in FY23. Fintech lenders disbursed over 7.1 crore loans worth ₹92,267 crore, with the portfolio outstanding at ₹60,922 crore as of March 2023.

Personal loans accounted for 83 per cent of the disbursement volume and 72 per cent of the disbursement value, with the market share of short-term loans of less than 6 months rising 25 per cent y-o-y to 88 per cent of the total disbursements value.

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Consumer loans comprised 15 per cent of the disbursements value and business loans for 6 per cent. The average ticket size of loans declined 19 per cent yoy to ₹12,989.

The 90+ (days-past-due) delinquency rate of the digital lending industry declined 50 bps over the course of the year, the report said.

Borrowers below 40 years contributed the largest share of 80 per cent in terms of value of disbursements, led by 50 per cent growth in disbursed amount to borrowers below 25 years of age. However, the share of female borrowers remained low at 14 per cent.

“It is great to see the fintech lending is delivering the promise of financial inclusion by meeting unaddressed product and market segments. Digital lending guidelines brought many changes last year, and the report assures that the industry is adapting remarkably well to the regulatory framework to accelerate customers’ access to formal credit,” said Sugandh Saxena, CEO at FACE.