Non-Bank Financiers Gain Market Share from Banks in Personal Loans

Strategic Insights -

As banks become increasingly cautious about unsecured loans due to tightened regulatory oversight, non-bank financial companies (NBFCs) are filling the gap, pushing more personal loans. Although NBFCs cater to slightly different customer categories, such as those with weaker credit scores, self-employed people, and those without salary income, data from a credit bureau shows they have gained market share from banks in this segment. A personal loan is an unsecured credit product, meaning borrowers don't need to provide any collateral, and is categorized as a consumption loan.

Key Takeaways:

  • The aggregate market share of outstanding personal loans held by banks (both private and public sector) fell 260 basis points (bps) to 70% in FY25 from 72.6% in FY24.
  • The market share of NBFCs increased by 160 bps to 23.5% in FY25 from 21.9% in FY24, according to data from credit bureau Crif High Mark.
  • NBFCs increased their share in personal loan originations by value to 36.4% in FY25 from 32.2% in FY24.
  • The share of private banks in personal loan originations decreased to 29.2% from 29.8% during the same period.
  • India's public sector banks held 31% of the market share in FY25, although their share also declined from 33.6% in FY24.
  • NBFCs have built their personal loan portfolios by targeting borrowers in tier-2 and below cities through lower ticket-size loans.
  • Banks continue to focus on salaried, middle-aged borrowers in tier-1 cities, while NBFCs cater to a wider and often underserved customer base.

Statistics:

  • The aggregate market share of outstanding personal loans held by banksfell 260 bps to 70% in FY25.
  • NBFCs increased their market share by 160 bps to 23.5% in FY25.
  • The share of NBFCs in personal loan originations by value increased to 36.4% in FY25.
  • The share of private banks in personal loan originations decreased to 29.2% from 29.8% during the same period.
  • India's public sector banks held 31% of the market share in FY25.

Sources:

  • "Mumbai, July 22"
  • Crif High Mark