Saturday, 05 Oct, 2024
The Indian fintech industry is poised for rapid growth, currently valued at approximately $110 billion in 2024. (Photo courtesy: FreePik)
In the first quarter of FY25, digital lenders disbursed over 2.6 crore loans, reflecting a notable 15% increase YoY compared to Q1 FY24. This growth highlights the ongoing demand for digital lending solutions, as consumers increasingly turn to online platforms for their financial needs.
Recent data from the Fintech Association for Consumer Empowerment (FACE), a Reserve Bank of India-recognised Self-Regulatory Organization (SRO-FT) in the fintech sector, reveals that loans disbursed by digital lenders in India soared to Rs 37,686 crore. This figure represents a substantial year-on-year increase of 27 per cent, highlighting the sector's resilience and adaptability.
Volume metrics show mixed signals
While the overall loan value soared, the growth in disbursement volume saw a slight dip of 5 per cent due to seasonal disturbances. Nevertheless, the number of loans crossed the 2.64 crore mark, reflecting a commendable 15 per cent growth year-on-year (YoY). This discrepancy suggests that while customer demand remains strong, external factors can impact the lending landscape.
Fintech industry to soar to $420 bn by 2029
The Indian fintech industry is poised for exponential growth, currently estimated at approximately $110 billion in 2024, with projections soaring to around $420 billion by 2029. This optimistic outlook was shared by Ajay Kumar Choudhary, Non-Executive Chairman and Independent Director of the National Payments Corporation of India (NPCI), in July.
Drivers of expansion
He highlighted several key factors fuelling this robust growth, including favourable government policies and an aggressive push towards a digital economy. The convergence of these elements is set to create a conducive environment for fintech innovation and expansion.
Since its inception in 2015-16, the fintech lending industry has emerged as a pivotal force in promoting digital financial inclusion across India. By leveraging technology, fintech firms have opened doors to previously underserved segments of the population, enabling broader access to financial services.
Industry insights from the FACETS report
The FACETS report, which tracks digital loan trends from 33 FACE members for the June quarter, reveals critical insights into market behaviour. Sugandh Saxena, CEO of FACE, emphasised that “the data affirms strong customer demand for digital credit and its pivotal role towards the country’s financial inclusion”, mentioning that member companies are committed to meeting credit needs responsibly, adhering to regulatory standards and risk management practices.
Sequential declines highlight market fluctuations
On a sequential basis, disbursement volume saw a marginal decline of 1 per cent compared to the previous quarter, with over 60 per cent of companies reporting decreases. The value of disbursements also dropped by 5 per cent, with nearly half of the surveyed companies attributing this to seasonal trends. Notably, eleven companies with quarterly disbursements exceeding Rs 5 lakh accounted for an impressive 93 per cent of the total volume.
Rising average ticket size
The average loan ticket size for the June quarter increased to Rs 12,997, representing a 16 per cent rise compared to the same period last year. This growth in average loan size may indicate a shift towards larger borrowing needs among consumers.
Assets Under Management trends
Of the 33 companies tracked, 27 (approximately 80 per cent) reported a collective AUM of Rs 47,362 crore as of June 2024. The report revealed that 68 per cent of this AUM is on-balance, while 32 per cent is off-balance. Among the 21 companies operating as non-banking financial companies (NBFCs), 72 per cent of their AUM is on-balance, indicating a robust framework for managing liabilities and assets.
Diverse AUM distribution
The AUM distribution among the 27 companies illustrates a diverse range of financial standings, with 10 firms exceeding Rs 1,000 crore, five in the Rs 500-1,000 crore range, five between Rs100-500 crore, and seven with AUM below Rs 100 crore. This variety highlights the broad spectrum of players within the digital lending ecosystem and their varying capabilities to meet market demands.
Navigating a dynamic environment
As digital lenders navigate a complex landscape marked by both growth and challenges, their ability to adapt to changing macro conditions while upholding regulatory standards will be pivotal for future success. The ongoing evolution of the sector promises to reshape India’s financial services, enhancing accessibility and trust among consumers.
