Digital disbursement of loans jumped twelve-fold between 2017 and 2020: RBI panel report

A majority of loans disbursed digitally by NBFCs were personal loans, followed by loans classified as ‘others’. These primarily include consumer finance loans.

The overall volume of loan disbursements through the digital mode grew more than twelve-fold between 2017 and 2020 to Rs 1.42 lakh crore from Rs 11,671 crore, the Reserve Bank of India (RBI) working group on digital lending apps said in its report.

The panel’s findings were based on data received from a sample of lenders representing 75% and 10% of the total assets of banks and non-banking financial companies (NBFCs) respectively as on March 31, 2020. The report observed that lending through the digital mode relative to the physical mode is still at a nascent stage in case of banks (Rs 1.12 lakh crore via the digital mode vis-à-vis Rs 53.08 lakh crore via the physical mode). In case of NBFCs, a higher proportion of lending (Rs 0.23 lakh crore via the digital mode vis-à-vis Rs 1.93 lakh crore via the physical mode) is happening through the digital mode.

“In 2017, there was not much difference between banks (0.31%) and NBFCs (0.55%) in terms of the share of total amount of loan disbursed through digital mode whereas NBFCs were lagging in terms of total number of loans with a share of 0.68% vis-à-vis 1.43% for banks. Since then, NBFCs have made great strides in lending through digital mode,” the group said in the report.

Private sector banks and NBFCs with shares of 55% and 30% respectively, are the dominant entities in the digital lending ecosystem. The share of NBFCs rose to 30.3% in 2020 from 6.3% in 2017, indicating their increasing adoption of technological innovations, the report said. During the same period, public sector banks also increased their share significantly to 13.1% from 0.3%. The working group attributed the prominent role of NBFCs in fostering digital modes of lending to the flexible regulatory regime they are subjected to.

The major products disbursed digitally by banks were found to be personal loans, followed by small and medium enterprises (SME) loans. A few private sector banks and foreign banks are also offering buy now pay later (BNPL) loans through the digital route.

A majority of loans disbursed digitally by NBFCs were personal loans, followed by loans classified as ‘others’. These primarily include consumer finance loans. “Even though the amount disbursed under BNPL loans is only 0.73% (banks) and 2.07% (NBFCs) of the total amount disbursed, the volumes are quite significant indicating a large number of small size loans for consumption,” the report said.