Companies like Facebook Inc, Xiaomi Corp, Amazon, and Google are now vying for India’s digital loan market, expected to expand to a $1 trillion industry. These companies have already announced plans or are tying up with small Indian lenders as they seek a foothold.
Tech giants are increasingly focussing on India’s digital payments market after online transactions surged amid the pandemic. According to a report in Bloomberg, digital lending is expected to grow to $350 billion by 2023, and reach $1 trillion in five years from 2019.
Facebook recently said that it would roll out its small business loan programme that offers loans through a partner to firms that advertise on its platform. It said that India would be the first country where it rolls out the programme. The loans offered would range from around $6,822 to $68,229 (Rs 5-50 lakh approx). Interest rates of 17-20 per cent will be levied, potentially without collateral.
Xiaomi India head Manu Jain also said that the company plans to offer loans, credit cards and insurance products in partnership with some of the country’s biggest lenders and startup digital lenders. Amazon.com also recently invested in fintech startup Smallcase Technologies, in what was its first investment in wealth management. The $40 million round also saw participation from Faering Capital, Premji Invest, Sequoia Capital India, Blume Ventures, Beenext, DSP Group, Arkam Ventures, WEH Ventures and HDFC Bank.
Google has also tied up with small lenders for opening of time deposits. It already offers wealth management products such as digital gold, mutual funds on Google Pay.
Even as the biggest names are focussing on the digital loan market, it is not one free of risks. The nation's bad loan ratio is expected to rise to 11.3 per cent by March.
The Reserve Bank of India is also planning to regulate online lenders, including more than 300 startups.
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