A recent report by MD Finance, a global fintech leader, highlights the impressive growth of India's non-banking financial companies (NBFC) and alternative lending sector. The study reveals a significant 21.5% year-over-year increase in aggregate income for NBFCs in 2023, while the alternative lending portfolio surged by 27%. Additionally, active loans grew by 14%, indicating a robust market trend since 2021. This expansion is driven by rapid technology adoption, a youthful tech-savvy population, and supportive government policies. Key findings include over 350 digital lending firms generating substantial revenues, with banks, NBFCs, and microfinance institutions holding a combined 72% market share.

The Rise of Digital Lending in India

India's digital lending sector has experienced remarkable development, fueled by increased consumer demand and innovative financial services. Since the pandemic began, the country has embraced advanced technologies to meet the growing need for contactless and paperless transactions. Government initiatives have further strengthened this ecosystem, fostering an environment conducive to private investments and innovation. Over 350 companies now operate in this space, collectively generating the largest portion of capital raised, accounting for 85% of total funding.

In recent years, India has seen a surge in digital lending platforms that cater to diverse customer segments. These platforms offer personalized services and streamlined processes, making it easier for consumers to access credit. The sector has witnessed a doubling in the value of new loans issued between 2021 and 2024, while the number of new loans has increased by 1.5 times. This growth underscores the increasing trust and reliance on digital lending solutions among Indian consumers. Moreover, the rise in active loans from €142M in March 2023 to €161M in March 2024 reflects a steady upward trajectory in market engagement.

Alternative Lending: A Driving Force Behind Financial Inclusion

The alternative lending segment in India has become a cornerstone of financial inclusion, with banks, NBFCs, and microfinance institutions playing pivotal roles. Together, these entities hold a dominant 72% share of the market portfolio. The sector has demonstrated consistent year-over-year growth, particularly in the value of new loans issued, which doubled from 2021 to 2024. This expansion is attributed to the increasing adoption of digital platforms and innovative financial products tailored to different regions and customer segments.

Between 2022 and 2023, the aggregate income of NBFCs grew from €44.2 billion to €53.7 billion, marking a 21.5% increase. Total assets also saw a 15% rise, climbing from €446.9 billion to €513 billion. The alternative lending portfolio showed a 14% growth in active loans, reaching €161 million as of March 2024, up from €142 million in March 2023. The outstanding portfolio value increased by 26.8%, from €39.5 billion in 2023 to €50.1 billion in 2024. Experts predict that by 2030, most fintech segments will experience a 4-6 times increase, driven by product diversification, enhanced client service, and strategic partnerships.