Fintechs Surge Ahead in Consumer Durable Loans as Banks Take a Backseat

In a notable shift, fintech companies are swiftly entering the consumer durables space, outpacing traditional banks. Loans for consumer durables from scheduled commercial banks saw a decline last year, in contrast to the growth seen in various other retail loan categories, as non-banking financial companies (NBFCs) and fintech lenders took charge.

Projections indicate that the Indian digital consumer lending market is poised to exceed $720 billion by 2030, making up about 55% of India’s overall $1.3 trillion digital lending market. Fintech giants like PhonePe and Groww are gearing up to tap into this market with consumer durable lending products. PhonePe is set to launch its consumer lending platform by January 2024, while Groww has already introduced consumer durable loans with plans for more credit products.

The Fintech Association for Consumer Empowerment (FACE) reported a significant year-on-year increase of 43%, with its member companies disbursing loans totaling ₹31,692 crore in the second quarter of the financial year 2024.

Despite the Reserve Bank of India (RBI) noting a dip in consumer durable loans from banks in August 2022, amounting to Rs 21,221 crore, the overall market surged from Rs 9,053 crore in August 2020. This growth in consumer products is attributed to loan disbursements from NBFCs and fintech platforms, collectively contributing 66% to consumer durable loans, according to a TransUnion CIBIL report.

This decline in bank-provided consumer durable loans coincides with a rising demand for such goods in India, with an 8% surge in the value of technical consumer goods reported in the first half of 2023, according to the Trade Promotion Council of India (TPCI). Notably, there was a 7% growth in washing machines and a 4% rise in microwave ovens compared to the same period in 2022.