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Given how easy it is to borrow a personal loan made possible by fintech non-bank companies, this loan segment has seen tremendous growth in the last 3-4 years, shows data release by credit bureau CRIF High Mark.  

The number of personal loans originated per year has more than tripled between FY 2017 and FY 2021. The total personal loan book stands at 644.6 lakh crore as of March 2021, as per CRIF’s data. 

 Interestingly, as the volumes of loans in this segment soared, the loan size shrunk equally fast in the same time period. Average ticket size of personal loans has reduced by 40% from Rs 2.4 lakh in FY17 to Rs 1.5 lakh in FY21.  

In the recent years, non-banking financial institutions (NBFCs) have been aggressively pushing small, short-term unsecured loans to young consumers primarily driving the tremendous growth for small-ticket loans in the range of 2,000-Rs50,000.

Small-ticket loans’ share in personal loan pie increasing  

Small-ticket personal loans (STPL), which are essentially loans below 1 lakh in value, have shone the brightest witnessing a whopping 11.5X growth in the number of loans sourced per year between FY17 to FY20.  

Within the small loans category, sachet loans below 10,000 have grown over 20 times in just four years.   

NBFCs have driven this growth by the way of loan offerings like buy-now-pay-later (BNPL) and no-cost EMI on all kind of consumer durables being sold under the sun.  

Data from CRIF shows that lower loan ticket sizes are dominated by NBFCs on both volume and value metrics. Until fiscal 2017, public sector banks made up the biggest share of STPLs at nearly 57% in both volume and value, with NBFCs at 20.6% in the volume metric. As on last quarter of FY 2020, NBFCs originated 90.3% of the total STPLs in terms of volume and 68.2% in terms of total loan value. Share of PSBs shrunk to a menial 2.6% and 13.5% in volume and value, respectively, in FY 2020. 

No prize for guessing consumers in which age group are driving this growth. About 54% of STPL borrowers in FY21 were less than 35 years old. To break it up further, 22.8% of loans with ticket size less than Rs 10,000 and 15% of loans with ticket size Rs 10,000- 25,000 were provided to borrowers aged below 25 years. 

 “The credit landscape in India is ever evolving and has witnessed changing consumer preferences, shift in demand towards smaller ticket loans, ease of access to credit, increased usage of digital platforms and entry of non–traditional lenders in the ecosystem to name a few," said Navin Chandani MD and CEO, CRIF High Mark. 

At the same time, delinquencies in the STPL segment have also gone up as Covid-19 disrupted incomes and thereby, borrower’s ability to repay the loan. Delinquency rate for STPLs in the 30 to 180 days payment overdue bucket stood at 8.8% as of Mar’21, compared to 3.5% for overall personal loan segment.  

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