Online Personal Loan Ticket Size Slumps To INR 9,861 In H1: RBI

SUMMARY

The average personal loan size dropped to INR 9,861 in H1 FY24 as against INR 10,642 in the entire FY23 and INR 10,955 in FY22

The RBI said that the fall in average ticket size coincided with the rise of young borrowers and more personal loans being disbursed in rural areas

This comes three months after the RBI released a draft framework to oversee aggregation of loan products by lending service providers

The average ticket size of personal loans disbursed by fintechs has been on a consistent decline for the past two years, as per a Reserve Bank of India (RBI) report.

As per the report, title ‘Currency and Finance (RCF) for the year 2023-24’, the average loan size dropped to INR 9,861 in the first half (H1) of the fiscal year 2023-24 (FY24) from INR 10,642 in the entire FY23.

The average size of personal loans disbursed by fintechs stood at INR 10,955 in the fiscal year ended March 2022.

The RBI said that the fall in average ticket size coincided with the rise of young borrowers and more personal loans being disbursed in rural areas.

“In India, the personal loan market has seen an accelerated growth phase. Fintechs mainly cater to small value personal loans with 68% of personal loans falling in the category of less than INR 5,000 in 2022-23. The average ticket size of personal loans by fintech was around INR 11,000 in 2023,” added the report.

The report also noted that the percentage of female borrowers availing digital personal loans has been on the rise, increasing from 12.9% in FY22 to 13.9% in FY23. The number stood at 14.2% in H1 FY24.

A region-wise breakdown of the digital personal data revealed that while 56% of the total borrowers came from “urban/ metropolitan” areas in H1 FY24, rural and semi-urban residents accounted for 33% and 11%, respectively.

The report comes a month after the central bank flagged the high levels of delinquency witnessed by fintech lenders for small loans below INR 50,000, adding that there was a need to closely monitor the unsecured lending category.

At the time, the RBI had said that the growth rate in personal loans declined to 30% at the end of March 2024 compared to 31% in the year-ago period.

The development holds weight as RBI has been closely scrutinising the sector. For instance, in November last year, the central bank increased the risk weightage for outstanding and new unsecured consumer credit exposure of commercial banks as well as NBFCs by 25 percentage points to 125% from 100% earlier.

The move increased the lending costs for unsecured consumer loans, forcing many startups like troubled Paytm to “go slow” on sub-INR 50,000 loans and focus on high-ticket personal and commercial loans. Later, Paytm paused its small personal loans business, including the postpaid portfolio, due to a decline in asset quality across industry.

Additionally, the RBI also tightened its noose around the digital lending space as it released a draft framework to oversee aggregation of loan products by lending service providers (LSPs) in April this year.