Non-banking finance companies (NBFCs) have built up their presence in mass market loans, with biggest inroad in two-wheelers segment where they have 29% of the market, says the CRIF High Mark report. They also dominate the small-ticket personal loans, loans for consumer durables, two-wheelers, affordable houses and commercial vehicles.
The report highlights that lenders are increasingly turning their focus on middle- and lower-income strata of the population and young borrowers who have small but often regular credit needs. India is one of the youngest countries in the world with more than 62% of the population in the working-age group (15-59 years), adding around 12 million people to this section every year.
“This segment of lending referred to as mass market is small in terms of value in overall lending but caters to large and growing middle class/lower-income sections of the society,” the report said. “However, this segment is expanding exponentially in terms of volume or count of loans. Lenders, especially non-traditional ones, are leveraging this opportunity to reach borrowers far and wide, thereby strengthening their borrower base.”
It pointed out that those in the age group below 25 and in the 26-35 age bracket account for a larger proportion of small-ticket loans, consumer durable loans and two-wheelers. However, affordable housing, business loans and commercial vehicle loans are availed by older borrowers in the 36-50 year category. Interestingly, 69.4% of two-wheeler loans are taken by borrowers who have never availed of any form of credit. As against this, only 28% of those taking small-ticket loans are first-time borrowers.
Besides individuals, micro-enterprises have turned to NBFCs. NBFCs, specializing in extending small collateral-free loans to low-income groups must walk the extra mile to bring micro-enterprises, hit by the COVID-19 pandemic, on course and ensure their sustainability by supporting the existing borrowers who are struggling to pay back their dues.
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It should be noted that NBFCs have reasonably strong fundamentals. They have continued to disburse credit to micro-enterprises to improve livelihoods and incomes despite prevailing COVID-19 led uncertainty which is impacting the repayment capability of small enterpreneurs.
