Fintech lenders have achieved a commanding position in India's personal loan market, according to the FinTech Association for Consumer Empowerment (FACE). Digital-first non-banking finance companies sanctioned 132 million personal loans worth ₹2.14 lakh crore during FY26, accounting for 77% of total loan volumes despite representing only 19% of total loan values. This represents a significant shift from FY23 when fintech lenders held a 66% volume share and 12% value share, demonstrating their rapid market penetration and focus on small-ticket, high-volume credit products. The report shows fintech lenders have become the largest distributors of personal credit in India by loan count, even as banks continue to dominate the market by value. The combined value of personal loans disbursed by these shadow banks has crossed ₹1.4 lakh crore, with digital NBFCs now accounting for more than three-fourths of all personal loan accounts originated in the country.
Despite their growing market share, digital NBFCs have experienced a steady slowdown in loan sanction volume growth, with the pace moderating from 80% in FY23 to 25% in FY25 and just 12% in FY26, as reported by Business Standard. While these companies saw growth in sanction value rise to 85% in FY23, the pace moderated to 39% in FY26, though it remained significantly higher than the 19% growth recorded in FY25. Their share of total personal loan sanction volumes has risen to 77% in FY26 from 66% in FY23, though it remains below the 80% peak recorded in FY25. The overall personal loan market recorded sanctions worth ₹11.45 lakh crore across 17.3 crore loans in FY26, with banks dominating by value at ₹6.94 lakh crore (61% market share) despite originating only 8% of loan accounts. Other NBFCs contributed ₹2.36 lakh crore (21% market share).
According to the FinTech Association for Consumer Empowerment report, fintech lenders are successfully serving previously underserved markets with 39% of loan sanctions by value going to borrowers in Tier III cities and smaller towns, while 37% originated from rural areas. The report highlights the growing penetration of digital lending outside India's largest cities, with the share of Tier III and smaller locations steadily increasing from 32% to 39% over the last four years. Among states, Telangana posted the highest growth in sanctioned value during FY26 at 50%, followed by Andhra Pradesh at 46% and Uttar Pradesh at 46%. More than half of the sanctioned value was extended to borrowers below the age of 35, demonstrating strong appeal among younger consumers seeking app-based credit solutions. Borrowers below 35 years accounted for 58% of the sanctioned loan value during FY26, with customers aged 26-35 alone accounting for 45% of total sanctions by value. Growth was particularly strong among younger and newer-to-credit borrowers, with loan sanctions to borrowers under 25 years growing 102% year-on-year, while sanctions to customers with less than one year of bureau history surged 125%.
The growing value and volume share of digital NBFCs came on the back of serving underserved segments that need small-ticket loans, with the average ticket size of personal loans disbursed by digital NBFCs standing at ₹16,238 in FY26, significantly lower than ₹90,547 for other NBFCs and ₹491,219 for banks, as reported by Business Standard. Nearly 43% of fintech lending by value comprised loans below ₹50,000, showcasing the sector's ability to serve customers seeking small-ticket, short-duration credit that traditional lenders have often found difficult to cater to profitably. The sector's loan book has expanded rapidly, with outstanding digital personal loans reaching ₹1.43 lakh crore as of March 2026, up from ₹56,927 crore three years earlier. Digital lenders now account for 45% of all active personal loan accounts in the country, though their share in outstanding loan value remains at 9%, reflecting the small-ticket nature of their portfolios. The sector's loan book has also expanded rapidly, with active loan accounts standing at 5.5 crore.
The report indicates that fintech lenders are moving up the credit spectrum, with more than half of sanction value now coming from customers with loan sizes above ₹50,000, credit bureau histories exceeding five years, and mid-to-low risk profiles. Average ticket sizes jumped 24% in FY26 to ₹16,238, reversing a decline seen in the previous year, with the share of loans above ₹5 lakh increasing to 10% from 8% year ago. In the March quarter of FY26, sanction value surged 57% year-on-year to ₹62,194 crore even as sanction volume growth moderated, highlighting the ongoing shift toward larger-ticket lending. The sector's loan book has also expanded rapidly, with outstanding digital personal loans reaching ₹1.43 lakh crore as of March 2026, demonstrating sustained growth momentum. More than 60% of the sanctioned value came from borrowers with a bureau vintage of over 5 years, indicating that digital lenders are increasingly catering to experienced credit users as well. However, as digital lending continues to grow, regulators are paying closer attention to this sector, with RBI Deputy Governor Shri Swaminathan J highlighting concerns about growing dependence on cloud platforms and the increasing role of algorithms in credit underwriting, fraud detection, and customer service.
