Digital non-bank financial institutions are expanding their presence in India’s personal loan market, handling increasing volumes of small loans, while banks maintain dominance in high-value lending, signalling a changing landscape in financial services.
Digital lenders in India are handling the bulk of personal loan applications, but banks still dominate the value of lending by a wide margin, according to a new industry report highlighted by Business Today. The Fintech Association for Consumer Empowerment, or FACE, said digital non-bank lenders sanctioned 3.4 crore personal loans in the June quarter, compared with 1.1 crore by other non-banking finance companies and 0.3 crore by banks. Yet banks accounted for ₹1.57 lakh crore of sanctioned value, more than half the market, while digital NBFCs represented just ₹64,656 crore.
The divide is largely explained by the size of the loans being written. FACE said digital NBFCs had an average ticket size of ₹18,802 in the quarter, far below the ₹4.52 lakh average for banks. Other NBFCs sat in the middle, with an average sanction size of ₹70,025. Business Standard, reporting on the same FACE and CRIF High Mark data, said the digital NBFC loan book had risen to ₹1.54 trillion by June 2026, up 28% from a year earlier, underlining how quickly this segment has expanded even though it remains focused on smaller borrowing.
FACE said the digital lending model continues to suit customers who need modest sums for short periods. The distribution of loan sizes supports that view: 27% of digital NBFC sanction value came from loans below ₹25,000, while a further 12% came from loans in the ₹25,000 to ₹50,000 range. Even so, loans above ₹50,000 accounted for a meaningful share of value, suggesting that the segment is gradually moving beyond very small-ticket borrowing.
The borrower profile also differs from that seen in the traditional banking market. According to the FACE data, 58% of digital NBFC sanction value went to borrowers under 35, while about 40% came from Tier III cities and smaller centres. The report also found that loan size rises with borrower age, credit bureau history and urbanisation. Customers with more than five years of bureau vintage took average loans of ₹31,007, compared with ₹6,857 for those with less than one year of history.
Overall, the numbers point to two separate markets operating side by side. Digital NBFCs are using scale to serve millions of borrowers with relatively small loans, while banks continue to capture the larger-value end of the personal loan market. FACE said digital NBFC sanction value rose 50% year on year in the quarter, outpacing 14% growth in sanction volume, a sign that the segment is not only expanding but also inching towards bigger loan sizes.
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