March 31, 2023

The disbursement volume of digital lenders has risen 147% year-on-year to 18.3 million in October-December, according to a report by the Fintech Association for Consumer Empowerment (FACE). The disbursement value jumped 118% YoY to Rs 18,540 crore. These lenders have reported an impressive growth in terms of both volume and value despite stringent guidelines issued by the Reserve Bank of India for the sector.

However, the average ticket size of loans fell to Rs 8,148 from Rs 8,456 a year ago.

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“A lot of changes happened on ticket sizes. People who might be in a certain ticket segment moved up since repeat customers usually get a higher amount of loan. On the other hand, there might be players in the larger ticket size loan category who may have taken a strategic call to lower their ticket size. It is not appropriate to look at the ticket size at an aggregate level,” a spokesperson from FACE said.

“There are a lot of nuances within and across companies which drive ticket sizes. This is what we see in data. People keep changing ticket sizes. There are a lot of dynamic contributors to those changes, and it is not that people are taking lesser ticket sizes,” he added.

The processing fee spread is 1.6-6.2% while the interest rate spread ranges from 15.2% to 37%.

In the previous two years, the RBI has tightened norms for digital lenders as lending practices of various lenders came under the spotlight.

In 2022, the RBI released guidelines to regulate digital lending like lending through digital lending applications as well as third party outsourcing arrangements. The guidelines sought to allay concerns over the lending practices of various digital lenders.

“The digital lending guidelines stipulated a series of directives on different areas such as transparency and customer protection, compliance in terms of know-your-customer, risk sharing, customer protection and security. I think there was a misconception that the guidelines will cause a slowdown in digital lending. A vast majority of prudent lenders already followed many aspects that were outlined in digital lending guidelines. The RBI also gave fintechs sufficient time to comply with the new guidelines,” Aditya Kumar, co-founder and chief executive officer, NIRO, said.

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“The demand for credit has risen materially and a disproportionate portion of that demand is going to fintechs because they have better distribution and better customer experiences. In a way, these guidelines have actually legitimised digital lending,” Kumar said.

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