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Small Ticket Loan Against Property (S-LAP) Gains Traction Among NBFCs with Growth Potential of Rs 22 Lakh Crore
December 04, 2023
Non-Banking Financial Companies (NBFCs) are increasingly shifting their focus towards the Small Ticket Loan Against Property (S-LAP) segment, sidelining medium ticket loans, according to a recent ICICI Securities report. The market potential for S-LAP is estimated at an impressive Rs 22 lakh crore, with only around Rs 1.8 lakh crore tapped by lenders as of March 2023, reflecting a penetration rate of less than 10 per cent.
The S-LAP market is currently concentrated in Maharashtra, Tamil Nadu, Gujarat, Karnataka, and Rajasthan, making up 53 per cent of the total market. Leading players in this domain include Shriram Finance, AU Small Finance Bank, and Equitas Small Finance Bank.
A recent report focusing on S-LAP loans with a ticket size of less than Rs 15 lakh reveals that the outstanding loans for 16 leading financiers stand at approximately Rs 1 lakh crore. However, CRISIL MI&A suggests the overall market potential for S-LAP is much higher at Rs 1.8 lakh crore, indicating robust growth potential.
Despite the current penetration rate being below 10 per cent, financiers anticipate strong growth momentum in the S-LAP segment. The total outstanding loans include secured LAP of less than Rs 15 lakh, and the report suggests that even with the inclusion of MSME loans of up to Rs 30 lakh, the total loans stand at Rs 2.5 lakh crore as of March 2023.
The top five states continue to dominate outstanding loans, contributing to approximately 53 per cent of the market. This state-wise diversity highlights credit penetration disparities across regions. While overall S-LAP penetration remains low, the analysis indicates that penetration in the top five states exceeds 20 per cent, emphasizing concentrated growth in specific regions.
District-wise analysis reveals that even in highly-penetrated states, the top five districts account for over 60 per cent of loans in the Rs 5-30 lakh ticket size range, indicating the potential for further penetration and expansion in states with an overall penetration of more than 20 per cent
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