MUMBAI: Digital lending firms regained some momentum in FY26, as unsecured lending picked up and growth stabilized after a regulatory-led slowdown the previous year, industry executives and analysts told Mint.
The rebound follows a muted FY25, when tighter regulations, rising costs and weakening credit quality sharply slowed expansion. Loan growth, for non-banking finance companies (NBFCs) with assets under management (AUM) below ₹15,000 crore, fell to about 13% in FY25 from around 36% a year earlier, according to a November 2025 report by Icra Ltd, as unsecured lending and microfinance segments contracted. Growth is expected to have recovered to 16-18% in FY26.
The recovery was led by unsecured personal loans, which formed the bulk of portfolios in FY26. KreditBee grew its assets under management to ₹10,200 crore in FY25 and is expected to reach ₹14,700 crore in FY26, implying 45% year-on-year growth. Kissht, which reported an 18% decline in FY25 net profit to ₹160.6 crore, posted ₹122 crore profit in the first half of FY26. Moneyview, meanwhile, reported ₹2,373 crore in revenue in the first nine months of FY26, already surpassing its FY25 revenue.
Between 2022 and 2025, the Reserve Bank of India (RBI) rolled out a series of measures to tighten oversight of digital lending, as rising delinquencies exposed risks in fintech-led unsecured credit. These included digital lending guidelines, caps on default loss guarantees, and stricter norms on loan recognition, culminating in a consolidated framework in May 2025.
Industry-level data also points to a pickup in activity. Digital NBFCs accounted for 19% of sanction value and 80% of sanction volume in the first half of FY26, according to the Fintech Association for Consumer Empowerment (FACE).
“The unsecured segment has started to pick up again and it is good for the sector,” said Mohit Agarwal, executive director at Unaprime Investment Advisors.
Digital personal lending firms typically operate in the small-to-medium-ticket segment, ranging from ₹5,000 to ₹10 lakh, offering loans at interest rates above 12%, and in some cases 28% or higher.
The renewed growth follows a period of stress in unsecured portfolios, particularly after disruptions in the microfinance (MFI) segment, which had spillover effects on broader unsecured lending. “Post-MFI, there was a liquidity crisis, unsecured books saw losses across NBFCs and banks,” said Madhusudan Ekambaram, co-founder and chief executive of KreditBee.
The MFI disruption, which peaked in late FY25, was driven by over-indebtedness of borrowers, aggressive lending practices, and weakened group accountability. Unsecured retail lending remains under watch despite improving asset quality trends, RBI said in its December 2025 Financial Stability Report.
Unsecured loans, which are not backed by collateral, are generally riskier than mortgage or vehicle loans. Rapid growth in such lending prompted the Reserve Bank of India to raise risk weights on consumer credit and bank loans to NBFCs in 2023, and tighten regulations for peer-to-peer platforms over 2023 and 2024. These measures curtailed funding flows to the sector and pushed lenders to shift towards secured loans to protect profitability and sustain growth.
Lenders have since focused on repairing asset quality. For instance, KreditBee’s gross and net non-performing assets (NPAs) improved from 2.8% and 0.7% as of 31 March 2025 to 1.8% and 0.4%, respectively, as of 31 December 2025.
Funding for growth
The recovery coincided with a pickup in fundraising, even as the Reserve Bank of India tightened credit flows to such firms from larger lenders in March 2025 amid concerns around borrower stress.
“Traditional NBFCs have cut down on unsecured exposure, so fintech lenders have to support growth through their own balance sheet,” Agarwal said.
KreditBee raised $280 million in a Series E round last week from Motilal Oswal Alternates, Hornbill Capital and MUFG-backed Dragon Funds, valuing the company at $1.5 billion. Fibe raised $35 million in a Series F round in December 2025 led by the International Finance Corporation, while Moneyview raised $75 million in 2024.
In contrast, some peers have seen limited recent equity inflows. Kissht’s last disclosed raise was an $80 million round in June 2022 led by Vertex Growth and Brunei Investment Agency. Consolidation is also underway, with Amazon acquiring Axio in 2025 in a deal pegged at over $200 million.
While near-term conditions have improved, the business remains capital-intensive. “This segment needs capital, NBFCs have cut down on unsecured exposure, so these players have no choice but to raise their own capital,” Agarwal said.
Rating agencies have echoed this view. “Capital position of NBFCs remains adequate in the near term; however, entities in segments under asset quality pressure may require capital support to sustain growth,” Icra said in its November 2025 report.
While most lenders are currently well-capitalized after raising funds over the past 6-12 months, those focused on unsecured SME and personal loans may need additional capital over the next 12-18 months, according to Icra.
IPO push
Investors are also becoming more selective as the sector recovers.
“Unsecured lending has gone through a challenging phase over the past 12–15 months, with some question marks emerging. Governance becomes a critical filter, as some of the sector’s issues have stemmed from gaps there," said Pranav Kumar, Partner at LeapFrog Investments, during an interview with Mint last month. "That said, it remains a segment with high social impact. We are not staying away from unsecured entirely, but we are being selective. We would look more favourably at companies that have weathered the recent credit cycle well.”
As private capital becomes more selective, larger digital lenders are increasingly turning to public markets for funding.
“This could be our last private round and we are focusing on listing,” Ekambaram said, adding that the timeline could be later this year, without sharing further details.
Firms such as Moneyview and Kissht have filed draft papers with the Securities and Exchange Board of India, with Kissht also receiving approval in January. Fibe has appointed bankers for a public listing, Mint had reported in October.
Industry participants say public markets could provide a more stable source of capital for scaling operations. “Once you get listed, you don’t have a problem with capital availability, that’s how this will evolve,” Agarwal said.
However, market conditions could delay timelines. Geopolitical tensions, including the US-Iran conflict, are expected to keep markets volatile in the near term. The founder of one IPO-bound firm said companies have flexibility after receiving regulatory approvals.
“We will end up going ahead with it after markets show signs of stability for a period,” the person said, requesting anonymity.