India’s FinTech Lending Revolution: A 2023 Review and What Lies Ahead in 2024

India’s FinTech Lending Revolution: A 2023 Review and What Lies Ahead in 2024

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In 2023, India’s FinTech lending landscape underwent a remarkable transformation, marking a pivotal chapter in intertwining technology and finance. The Reserve Bank of India (RBI) introduced the Digital Lending Guidelines (DLG), a bold step towards ensuring transparency and customer protection in the burgeoning digital lending space. These guidelines, along with Fair Lending Practices, mandated caps on interest rates and emphasized stronger Know Your Customer (KYC) norms, reshaping the industry into a more responsible and secure sector. These were the regulations that made the fintech lending space adapt or change to a new model according to the guidelines and streamline their process for better compliance.

Amidst these regulatory changes, technological innovation took center stage. Artificial Intelligence (AI) and Machine Learning (ML) became crucial in enhancing loan approval rates, with a NASSCOM report citing a 20% improvement, thanks to AI-driven risk models. The era also saw blockchain technology gaining momentum, bolstering transaction security and transparency.

The shift towards digital lending saw a significant upswing, evidenced by a 35% increase in digital loan origination, as reported by KPMG. This growth mirrored the Indian consumer’s increasing preference for digital solutions, driven by convenience and accessibility and the year also witnessed a surge in funding for FinTech startups, with venture capital and private equity investments reaching a record high of over $2.5 billion, highlighting the sector’s potential and investor confidence.

However, the path wasn’t devoid of challenges. Cybersecurity concerns escalated, with a notable rise in financial cyber threats, emphasizing the need for robust security measures. Furthermore, the sector grappled with the intricacies of complying with the Digital Personal Data Protection Act (DPDP Act), balancing the need for innovation with stringent data protection standards. Also, the unsecured PL market, especially with small ticket size, is hitting a roadblock around the recent increase in risk weight. However, this move of RBI looks favourable for the lending players with a defined/controlled end use, like an education loan or an SME loan.

As we look towards 2024, the sector is poised for further evolution. The integration of AI and ML is expected to continue, enhancing personalized lending experiences. The concept of ‘Banking as a Service’ (BaaS) is set to foster closer collaborations between traditional banks and FinTech firms. Also, the Reserve Bank of India (RBI) has been actively working to regulate the co-lending model to ensure a smooth collaboration between banks and NBFCs. In 2024, we might see further refinement of these regulations, focusing on ensuring transparency, risk-sharing mechanisms, and customer protection. However, the sector must also brace for global economic influences, particularly from the US Fed’s rate decisions.

More comprehensive regulatory guidelines are anticipated, focusing on cybersecurity and financial inclusion. The digital lending market in India is projected to reach an impressive USD 1 trillion by 2024, driven by a digitally savvy consumer base and widespread mobile technology adoption.

In summary, 2023 was a transformative year for India’s FinTech lending sector, marked by regulatory shifts, technological advancements, and a significant increase in digital lending. Looking ahead, 2024 promises further growth and innovation, though not without its set of challenges. The sector is at a crucial juncture, ready to adapt and thrive in an ever-evolving financial landscape.

Author Profile

Ravi Kishore Goyal is a distinguished professional in the fintech sector with over nine years of experience in strategy, program management, and growth. He is currently Vice President of Strategy at Propelld, a dynamic fintech in education loans space. He has previously worked with PayU, Bizongo and Kotak Mahindra Bank and his entrepreneurial spirit led him to co-found AlphaPay, the first chat-based UPI payment app. He is an IIT Bombay alumnus and holder of a certification from GrowthX.

Disclaimer: The opinions expressed here are those of the author and does not reflect the views of