Commercial Bank Digital Loans Rise From 1.43% in FY2017 to Over 6% As On 2020

Scheduled commercial bank (SCBs) Digital loans rose from 1.43 per cent in FY2017 to 6.04 per cent as on Dec 31, 2020, whereas for non-banking financial companies (NBFCs), it rose from 0.68 per cent in FY2017 to 53.05 per cent in the same period, the finance ministry said.

The ministry revealed the data citing the Reserve Bank of India (RBI)’s working group report on digital lending after questions were raised in the Lok Sabha on whether there has been a rise in the number of people taking digital loans and, if so, the number of online and offline applications received in the last one year, bank-wise; and steps taken for digitisation of banks.

RBI apprised that it had not maintained bank-wise data on the number of digital loan applications received. "Banks have been taking measures to improve digital infrastructure for banking services and to promote digitization,” the ministry said in the statement.

The steps taken by banks include the establishment of digital banking units to deliver digital banking products and services, rolling out an end-to-end digital platform for account opening, lending for MSME, retail, agriculture, and allied activities, and enhanced access to mobile and internet banking along with the option to use regional languages, the statement said.

It further said that banks accelerated digital payments and digital marketing in semi-urban and rural areas for sourcing business (deposits , loans , etc.) through the internet and social media.

In addition, they are digitizing the collection process for retail and MSME customers.

In its report in November 2021, RBI noted that technological innovations have led to marked improvements in efficiency, productivity, quality, inclusion, and competitiveness in extending digital lending services by banks.

However, there remained issues due to “greater reliance on third-party lending service providers mis-selling to unsuspecting customers, concerns over breach of data privacy, unethical business conduct, and illegitimate operations.”

Although the current share of digital lending is not significant “for it to affect financial stability”, the growth momentum has compelling stability implications,” it said.

It hopes easy access to digital financial services, technological innovations, and cost-efficient business models will “lead to a meteoric rise in the share of digital lending in overall credit”.