India’s digital lending market grows 13-fold in 5 years, set to capture 21 pc of personal loans by FY31

New Delhi, Aug 7 (IANS) India’s digital lending market has grown nearly 13 times in five years and is expected to account for 20 to 21 per cent of all personal loan sanctions by FY2031, a report said on Friday.

The digital lending market has grown from approximately Rs 0.15 trillion in FY21 to Rs 2.2 trillion in FY26 and is projected to continue outpacing the broader personal lending market, the report from Redseer said.

The market is expected to clock a digital compound annual growth rate of 26–27 per cent between FY2026 and FY2031 versus 16–18 per cent for non‑digital lending.

The report further said nearly two‑thirds of digital lending demand has been formalised as borrowers who would otherwise have relied on informal sources enter the formal financial system.

Borrowers increasingly choose digital lending for convenience and faster disbursals rather than because they lack access to traditional lenders.

“Nearly 69 per cent of borrowers have taken more than one digital loan, signalling that repeat borrowing and borrower lifetime value are becoming more important than first-time acquisition,” it said.

The report identified two distinct borrower cohorts, credit climbers and cautious borrowers, each requiring different retention and growth strategies despite having similar demographic profiles.

The report recommended lenders to focus on raising pre-approved limits for borrowers with growing credit needs while helping loyal borrowers gradually progress to higher-ticket loans through personalised engagement and transparent pricing.

The digital lending has been additive to the market rather than merely taking banks’ share, with only 31 per cent of digital borrowers switching from bank credit.

“Digital is the default mode when a loan can be underwritten on alternate data and disbursed in hours. Where collateral and size dominate, banks are unchallenged, leaving large-ticket unsecured as the one contested frontier,” the report noted.

—IANS

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