India’s digital lending market has expanded nearly 13-fold in five years, with fintechs currently leading over 77% of personal loan approvals and the segment expected to account for a fifth of all personal loans by FY2031, signalling a significant shift in consumer finance.
India’s digital lending market has expanded nearly 13-fold in five years and could account for about a fifth of all personal loan approvals by FY2031, according to a Redseer report cited by ETBFSI. The market has risen from roughly Rs 0.15 trillion in FY21 to Rs 2.2 trillion in FY26, underscoring how quickly app-based credit has moved into the mainstream of consumer finance.
Redseer said digital lending is likely to keep growing faster than the wider personal loan market, with a projected compound annual growth rate of 26% to 27% between FY2026 and FY2031, compared with 16% to 18% for non-digital lending. The report also said almost two-thirds of digital lending demand has been formalised as borrowers who might otherwise have turned to informal lenders are now entering the regulated financial system.
The report points to a market that is no longer driven only by first-time users seeking quick credit. Nearly 69% of borrowers have taken more than one digital loan, suggesting repeat usage and long-term customer value are becoming more important. Redseer split borrowers into two broad groups, credit climbers and cautious borrowers, and said lenders need different strategies for each, from raising pre-approved limits to using personalised engagement and clearer pricing to encourage larger-ticket borrowing over time.
The broader industry backdrop suggests the sector is regaining momentum after a regulatory-led slowdown. LiveMint reported that digital lenders saw an early recovery in FY26, helped by unsecured lending, even as capital constraints and credit risk remained in focus. Meanwhile, Economic Times data showed fintech-led lenders accounted for more than 77% of personal loans sanctioned in FY26, while an RBI-linked report cited by the paper said fintechs held over 56% of small personal loans by March 2026, but also faced higher delinquency rates than banks and traditional non-banking lenders.
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