For the digital lending industry, which came under pressure during Covid-19, FY21 and FY22 were tough years as several large credit fintechs had to provision for bad loans due to rising delinquency rates, thus accumulating losses, the report said.
Overall industry delinquency rates have stabilised from 8.6% at the end of FY21 to 4.7% by end-FY22, it added.
Delinquency rate in lending represents the percentage of loans that are due and is an indicator of the health of the lender’s portfolio.
Now, as macroeconomic headwinds hit businesses globally, delinquency rates for business loans have seen an uptick in FY23, crossing the 4% threshold as of March, data from the report showed.
Even consumer loans have seen a rise in delinquency rates amidst inflationary winds, from 1.83% in FY22 to now 2.5% in FY23.
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ET reported earlier that in a bid to minimise risk, balance sheet fintechs such as Lendingkart have moved into co-lending, thereby effectively becoming a loan sourcing platform for their larger peers, while keeping a small portion of the loan on their books.Also read | What is really happening with digital credit in India
Disbursement jumps
As per the report, FY23 saw the Indian digital lending industry dole out 7.1 crore loans amounting to Rs 92,267 crore. This is a 49% year-on-year jump in terms of number of loans, and 21% in terms of loan value disbursed, signalling a recovery for the sector.
Personal loans still contributed to 72% of the overall loan disbursed in FY23. Further, average ticket sizes for the overall digital lending industry declined by 19% on an annual basis to Rs 12,989 in FY23.
However, average ticket sizes for the business loans segment grew 15% to Rs 4.72 lakh in FY23, from Rs 4.10 lakh, showcasing that digital lenders were focusing on high-creditworthy customers.
Focus on Tier 3
Digital credit fintechs continued to focus on tapping newer customers in the remote parts of the country. According to the report, 40% of loan value disbursed in FY23 came from tier 3 cities, actively taking share away from metros and tier 1 cities.
Maharashtra, Karnataka and Telangana accounted for almost 50% of the loan value disbursed by credit fintechs in FY23, the report showed.
Short-term loans continued to dominate the digital lending pie, accounting for 88% of loan value.
