Non-banking finance companies (NBFCs) continue to grow in the personal loan (PL) segment in volume terms, doubling their market share in the last two years up to March-end 2020, according to CRIF High Mark.
Market share improves
In terms of volume, NBFCs’ market share in PLs improved from 22.68 per cent in March 2018 to 44.92 per cent in March 2020. Their market share in August 2020 was at 42.16 per cent, according to the credit information bureau.
Public sector banks (PSBs) and private sector banks (PvBs) lost significant volume share in PLs over the last 2 years.
In terms of volume, PSBs’ market share in PLs came down from 40.07 per cent in March 2018 to 23.83 per cent in March 2020. Their market share in August 2020 was at 24.41 per cent.
In term of volume, PvBs’ market share in PLs came down from 33.09 per cent in March 2018 to 27.03 per cent in March 2020. Their market share in August 2020 was at 29.14 per cent.
CRIF said: “NBFCs, including FinTechs, are doing more and more small-ticket personal loans business, offering a variety of personal loans to customer segments who may not qualify for personal loans via traditional lenders as well as tailored offerings to the changing preferences of customers.
“This helps in expanding their borrower base rapidly and provides cross-sell opportunities for other financial products & services.”
Value market share
In terms of value market share at the end of FY20, there is no significant shift in the last two years for NBFCs.
PVBs and PSBs continue to dominate the personal loans landscape by value, with a share of 39.77 per cent and 38.87 per cent, respectively, as of August 2020, offering credit to their captive customer base, including in tier II and III geographies
In terms of value, NBFCs’ market share in PLs inched up from 14.70 per cent in March 2018 to 17.94 per cent in March 2020. Their market share in August 2020 was at 17.01 per cent.
PSBs’ market share in PLs by value edged down from 40.90 per cent in March 2018 to 39.42 per cent in March 2020. PvBs’ market share in PL sby value edged down from 40.65 per cent in March 2018 to 38.32 per cent in March 2020.
Industry growth
As of August 2020, the personal loans book of the industry (banks and NBFCs) stood at ₹5,07,684 crore, having grown by only 0.57 per cent over March 2020 due to Covid-19 disruptions.
Within the overall industry book, the STPL market as of August 2020 stood at ₹12,000 crore, having grown 77 per cent year-on-year (Y-o-Y) at the end of March 2020.
In the last two years (FY18 and FY19), the PL book has grown by around 40 per cent annually, which dropped to a sluggish annual growth of only 26.49 per cent as of March 2020.
CRIF said Small Ticket PL (STPL), with ticket size less than ₹50,000, has been observed to drive volumes by as much as 162 per cent y-o-y as of March 2020.
As per the CIB’s assessment, more than 50 per cent of volume share in STPL is in the up to ₹5,000 segment, as of March 2020, a strong indication that the concept of checkout finance and pay day loan is catching up (PL for convenience).
As of March 2020, loan delinquency in the 31-180 Days Past Due (DPD) and 91-180 DPD buckets increased to 5.55 per cent (2.79 per cent as of March 2018) and 2.59 per cent (0.91 per cent), respectively.
Origination value
In terms of value, NBFCs had a relatively lower value market share of 20.82 per cent in originations in FY20, as a result of disbursing small ticket-sized loans through attractive onboarding offers and rewards and easy repayment options to acquire customers, said CRIF.
PSBs (36.29 per cent origination value market share as of March 2020) and PvBs (39.51 per cent), largely disbursing high-value personal loans or pre-approved loans to other customer segments who may not be banking with NBFCs, have a larger share in the amount of disbursements.
Impacted by the pandemic and the lockdown, the share of NBFCs (8.91 per cent) and PvBs (25.67 per cent) in originations in FY21 till August has reduced, while that of PSBs has increased to 62.16 per cent.