Digital Initiatives to Triple India’s Retail Lending by 2030, Says S&P Global Ratings
New Delhi, India – S&P Global Ratings has highlighted the significant impact of digitisation on India’s economy. The agency predicts that state-backed digital initiatives will lead to a tripling of Indian retail borrowing by 2030, raising household debt to about USD 2.5 trillion, or 34% of GDP.
Boost in Financial Inclusivity
Technology has already improved financial inclusivity in India, with basic savings account ownership rising to 77% from 35% in 2011. According to the National Bank for Agriculture and Rural Development (NABARD), the average micro-loan borrowing is about USD 400.
Growth in Micro-Loans
The growth in retail lending is expected to include a faster increase in micro-loans, especially for low-income earners. These loans could account for about 7% of household debt by 2030. Despite this growth, only 12% of Indians over 15 had borrowed from a formal financial institution before 2021, which is less than half the global average of 28%.
Challenges and Opportunities
Borrowing among lower earners is still low, limiting their access to capital for investment. Improved digital payment infrastructure is helping lenders collect payments more efficiently, reducing barriers to competition in the lending market. This is expected to strengthen India’s economy and provide growth opportunities for the financial sector.
Key Initiatives and Market Leaders
The report highlights the importance of initiatives like Pradhan Mantri Jan Dhan Yojana, Aadhaar, and mobile penetration. Tech-savvy private sector banks and finance companies are leading the growth in retail lending, especially in mass-market loans and affordable housing loans. Finance companies and small finance banks are also leading the microfinance segment, which is crucial for improving financial inclusion.
Microloan Growth
The total value of microloans has grown at a compound annual growth rate (CAGR) of 18% over the last three years, now accounting for about 2% of total loans, according to Equifax.
Doubts Revealed
S&P Global Ratings -: S&P Global Ratings is a company that gives opinions about how safe it is to lend money to different countries and companies. They help people understand if it’s a good idea to invest money.
Retail Lending -: Retail lending means giving loans to regular people, like you and me, instead of big companies. These loans can be for things like buying a house or a car.
State-backed digital initiatives -: These are projects started by the government to use technology to help people. For example, making it easier to open a bank account or pay for things using a phone.
Household debt -: Household debt is the total amount of money that all the families in a country owe to banks and other lenders. This can include loans for houses, cars, and other things.
USD 2.5 trillion -: USD 2.5 trillion is a very large amount of money. One trillion is a thousand billion, and one billion is a thousand million. So, 2.5 trillion dollars is a lot of money that people in India might borrow by 2030.
Financial inclusivity -: Financial inclusivity means making sure everyone has access to financial services like bank accounts, loans, and insurance. It helps people save money and borrow when they need to.
Micro-loans -: Micro-loans are very small loans given to people who don’t have a lot of money. These loans can help them start small businesses or take care of emergencies.
Formal institutions -: Formal institutions are official places like banks and credit unions where people can borrow money. They are different from informal lenders like friends or local moneylenders.
Digital payment infrastructure -: Digital payment infrastructure is the technology and systems that allow people to pay for things using their phones or computers. This includes apps like Paytm or Google Pay.
