Fewer delinquencies on digital loans: report

Mumbai: A report by the Digital Lenders Association of India and credit bureau CRIF High Mark has said that defaults on loans sourced by digital lenders are lower than industry-level delinquencies.

Digital lenders have seen a positive or consistent trend in the repayment behavior of the loans they issued. Specifically, for digital loans, the percentage of loans with delays at 6 months on book (6 MOB) and 30 days past due (dpd) decreased from 6.3% to 6% between March and September 2023. Similarly, loans with delays at 6 MOB and 90 dpd went down from 5.1% to 4.4%, and loans with delays at 9 MOB and 60 dpd remained stable at 5.4%.

During the same period, for overall personal loans, the percentage of loans with delays at 6 MOB and 30 dpd decreased from 8.9% to 7.2%. Loans with delays at 6 MOB and 90 dpd also decreased from 7.8% to 6.3%, and loans with delays at 9 MOB and 60 dpd decreased from 6.9% to 6.6%. While there has been an overall improvement, the delinquencis in digitally sourced loans continue to be lower than industry.

According to the report, consumer lending witnessed a resurgence in lending post-Covid led by Products such as small ticket personal loans (STPL) (204% growth) followed by Gold Loans (121%), Personal Loans (115%), Credit cards (76%) respectively from Mar’20 to Sept’23.

The growth in personal loans is driven by smaller cities with cities outside the top 100 recording 3.5 times growth compared to 2.3 times growth for the top 100 cities.

“New-age digital lenders have revolutionised lending through wider reach and innovative products, and now they are also focusing on asset quality and customer selection,” said Sanjeet Dawar, Managing Director, CRIF High Mark. In the personal loans (PL) space, Digital Lenders (members of DLAI) made up 7.9% of the total loan amount and 19.8% of the total loans issued in the financial year 2023.

Even though digital lenders were still giving out a considerable number of loans below Rs 1 Lakh, the approved amount (Origination value) for these loans, especially STPL under Rs 50k, decreased from the financial year 2020 to 2023. On the other hand, there was a noticeable increase in the share of the approved amount for loans above Rs 1 Lakh among Digital Lenders during the same period.

A significant trend observed is the growing influence of Non-Banking Financial Companies (NBFCs) in loan originations. The share of Digital Lenders (DLAI Members) and other NBFCs in the total approved amount increased from the financial year 2020 to 2023. Additionally, there was a rise in the share of other NBFCs in the total number of loans issued during the same period.