Digital-first non-banking finance companies (NBFCs), which form the backbone of India’s fintech lending ecosystem, sanctioned 13.2 crore personal loans worth Rs 2.15 lakh crore during FY26. While these loans represented only 19% of the total value of personal loans sanctioned, they accounted for 77% of the total number of loans disbursed, underscoring the sector’s focus on small-ticket, high-volume credit.
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The report shows have become the largest distributors of personal credit in India by loan count, even as banks continue to dominate the market by value. In FY26, the overall personal loan market recorded sanctions worth Rs 11.45 lakh crore across 17.3 crore loans. Banks accounted for Rs 6.94 lakh crore, or 61% of total sanctions, despite originating only 8% of loan accounts, while other NBFCs sanctioned Rs 2.36 lakh crore, representing 21% of the market by value.
The divergence reflects the distinct role played by fintech lenders in the retail credit ecosystem. The average loan size disbursed by stood at Rs 16,238 in FY26, compared with Rs 90,547 for other NBFCs and Rs 4.91 lakh for banks. Nearly 43% of fintech lending by value comprised loans below Rs 50,000, highlighting the sector’s ability to serve customers seeking small-ticket, short-duration credit that traditional lenders have often found difficult to cater to profitably.
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The report, based on from more than 110 digital NBFCs, highlights how fintech lenders have steadily increased their footprint in India’s personal loan market over the past four years. Their share of personal loan sanctions by volume has risen from 66% in FY23 to 77% in FY26, while their share by value has increased from 12% to 19% during the same period.
The growth of digital lending is also reshaping the geography and demographics of consumer credit. About 39% of loan sanctions by value went to borrowers in Tier III cities and smaller towns, while 37% originated from rural areas. More than half of the sanctioned value was extended to borrowers below the age of 35, highlighting the popularity of app-based credit among younger consumers.
Industry executives say the ability to originate loans digitally, assess risk using alternative data and deliver funds instantly has enabled fintech lenders to serve segments that often remain underserved by traditional financial institutions.
The sector’s loan book has also expanded rapidly. Outstanding digital personal loans stood at Rs 1.43 lakh crore as of March 2026, up from Rs 56,927 crore three years earlier. Digital lenders now account for 45% of all active personal loan accounts in the country, although their share in outstanding loan value remains at 9%, reflecting the small-ticket nature of their portfolios.
At the same time, the profile of fintech borrowers is evolving. The report notes that digital lenders are increasingly moving up the credit spectrum, with more than half of sanction value now coming from customers with loan sizes above Rs 50,000, credit bureau histories exceeding five years and mid-to-low risk profiles. Average ticket sizes rose 24% year-on-year in FY26, helping sanction values grow 39% even as growth in loan volumes moderated to 12%.
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Asset quality has also shown signs of improvement. The proportion of loans overdue by more than 90 days declined to 1.4% in March 2026 from 3.3% in March 2023, suggesting that underwriting standards and collection mechanisms have strengthened as the industry matures.
The report indicates that fintech lending is no longer confined to providing emergency credit or small cash advances. As digital lenders expand into larger-ticket loans and attract more seasoned borrowers, they are increasingly becoming an integral part of India’s retail credit ecosystem, competing with traditional lenders while continuing to deepen credit access across underserved segments.
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