The Indian personal loan market is changing. Not all for the good


Getting a personal loan has never been easier. A few clicks are enough. Offers from banks and non-banks invade your screen. And no-cost IMEs mean your interest charges can be kept low.

The result is that more personal loans are processed, smaller in size and by younger borrowers. That’s according to a study by the credit bureau CRIF High Mark, which was released on Tuesday.

The number of personal loans taken out per year has almost tripled between FY18 and FY20, with growth that has stabilized during the current year. As of August 2020, the personal loan book stood at Rs 5.07 lakh crore, according to the report.

Borrowers are getting younger

According to CRIF data, borrowers under 30 have contributed to the increase in personal loan volumes over the past two years.

While in the fiscal year ended March 31, 2018, borrowers aged 18 to 30 contributed 27% of the volume of loans issued, this share increased to 41% in fiscal year 2019-20. Comparatively, people over 40 contributed 41% of lending volume in fiscal 2018, which fell to 24% in March 2020.

In the current fiscal year, borrowers between the ages of 18 and 30 contributed 31% of lending volume through August 2020, indicating the cautiousness of lenders.

“Observed over the past 3 years, NBFCs have continued to focus on lending to millennials and young clients under 35 with a steadily increasing share in annual fixtures,” the report titled CreditScape said. “These borrowers also have an important role to play in the strong growth of the low cost personal loan market in India.”

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