Online or digital onboarding for obtaining loans in India is expected to increase to 55-75% of the total credit disbursement by 2025, according to Akhil Handa, head of Fintech, partnerships and mobile banking and digital lending department, Bank of Baroda.
Handa revealed that, between 2015 and 2020, about 20% of credit disbursements or new loans were technology-driven. Issuing loans online has proven to be successful in the retail sector and has also worked well for small business lending, Handa claims.
Handa predicts:
“In the next phase of digital lending between 2020 and 2025, it will go beyond tier I and II cities. By 2025, an estimated 55 to 75% of loans that get booked will be digital in nature.”
His comments reportedly came during a recently held Indian Chamber of Commerce organized webinar. As covered by local news outlet, The Week, out of approximately 75 million (micro-, small and medium enterprises) MSMEs in India, only 18 million are using digital platforms. However, this should change in the next five years, as more companies are expected to adopt digital transformation strategies, which is a key Fintech trend that has been accelerated due to COVID-19, Handa stated.
Infrastructure enablers including digital land registry, online account aggregators, and the Open Credit Enablement Network (OCEN), which is used to link up lenders and marketplaces, will all play a key role in transforming India’s lending business, Handa said.
Fintech adoption by Indian businesses has grown by 100% during the past year, according to K M Nanaiah, MD at Equifax Credit Information Services. Fintech service providers and traditional banks, along with non-bank financial companies (NBFCs), have all served a vital role in supporting India’s digital lending sector.
Earlier this month, India’s digital lending Fintech RevFin partnered with EVI Technologies to offer financing to E-Rickshaw users.
Fintech adoption in India will lead to more contactless and digital payments, but cybersecurity risks must be addressed, an industry executive recently explained. The Reserve Bank of India is working on enabling offline digital payments to help consumers in rural areas join the formal economy.