Fintech lenders have established a commanding position in India's small personal loan market, capturing 56.8% market share in loans below ₹50,000 as of March 2026, according to the Reserve Bank of India's latest Financial Stability Report. This dominance was driven by a robust 41.6% year-on-year expansion in credit, significantly outpacing the overall segment growth of 20.1%. In contrast, non-bank finance companies held a 30.7% market share, while banks' share declined to just 10.1%, with the remaining 2.3% held by other lenders.
Despite their market dominance, fintech lenders are experiencing higher delinquency rates compared to traditional lenders. As reported by the RBI, delinquencies in small-ticket personal loans originated by fintech lenders stood at 6.4% in March 2026, exceeding the 5.7% rate for NBFCs and 4.1% rate for banks. This trend indicates that while fintechs are growing rapidly, they are also witnessing the highest levels of stress in the lending sector, with the fastest-growing lenders experiencing the most significant asset quality deterioration.
The RBI data reveals significant exposure to younger, riskier borrower segments among fintech lenders. According to the report, unsecured loans constituted 70.5% of fintech lenders' overall loan book, with nearly half of these loans extended to borrowers below the age of 35. This concentration in younger demographics highlights the sector's increasing exposure to customers with potentially higher default risks, contributing to the overall asset quality concerns in the small personal loan segment.
Across the broader consumer lending market, asset quality continued to improve according to the RBI data. Delinquency rates in business loans fell to 1.8%, while credit card delinquencies declined to 1.4% and personal loan delinquencies eased to 0.9%. The microfinance sector also showed early signs of stabilisation, with credit expanding for the first time after seven consecutive quarters of decline, though the borrower base continued to contract by 22.7 lakh during the latest quarter. Asset quality improved for the fifth consecutive quarter, with the share of loans overdue by 31-180 days declining further, and the proportion of borrowers with loans from three or more lenders falling to 9.7% in March 2026.
