Future of Indian Personal Loan Sector - Personal Loan Blog - Tata Capital

Future of the Indian Personal Loan Sector

Feb 28, 2017

The last decade has witnessed a huge change in the Indian loan market. A recent report by Credit Rating Information Services of India Limited (CRISL), one of the largest credit rating agencies, states that the loan growth is expected to remain flexible at 17% CAGR in the coming five years.

In the past, availing of a loan was a cumbersome task. There were many formalities to be completed, like extensive documentation, slow application processing and disbursal, besides others. However, this scenario has changed tremendously now. Competition between banks and Non-Banking Financial Companies (NBFCs) has led to benefits like quick disbursal, minimum documentation, faster approval, and superior customer service.

Due to these reasons, personal loans are becoming a popular option for the masses. This sector will continue to witness a rise in the demand for such loans.

The three main reasons for this boom are as follows:

1. Online facilities

Earlier, you would have to make multiple visits to the bank to apply for a personal loan and then wait to be notified regarding any response. However, today, you may check the eligibility criteria, the process of applying for a loan, as well as the repayment schedule online. As online transactions possess a greater degree of convenience, availing of a personal loan online is, therefore, a preferred option.

2. Increased competition between financiers

There was a time when lenders would critically examine your loan application and then approve or reject it accordingly. However, this is not the case today. The lender's relationship experts are willing to assist you with all the things required to accelerate your application process. This stiff competition among financiers to increase their customer base also contributes to the drastic change in the lenders' outlook towards customers.

3. Credit score system

Credit scores can help to gain a valuable insight into the credibility of the loan applicant. Credit scores are ratings provided by the credit rating agencies like Credit Information Bureau (India) Limited (CIBIL). These are generated by taking the applicant's past repayments and financial position into consideration. This system has made the provision of loans less complex. Today, if you have a good credit score, lenders do not hesitate to approve your loan application since your chance of default is very low.

Future of the personal loan sector in India

The Indian personal loan sector has indeed witnessed a change. Lenders like banks and Non-Banking Financial Companies (NBFCs) have grown more professional and have implemented modern technological facilities as well. Besides, NBFCs are also set to grow at a rapid pace of 25% to 30% in the years to come.

Due to such high growth of banks as well as NBFCs, the availability of credit through loans will increase further. Statistics have also shown that the future of this sector will continue to rise positively.