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The $1 trillion digital loan sector in India is the next fight for internet behemoths.

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The $1 trillion digital loan sector in India is the next fight for internet behemoths.

India’s digital loan market is becoming a battleground for companies from Facebook Inc. to Xiaomi Corp.

Companies ranging from Facebook Inc. to Xiaomi Corp. are vying for a piece of India's digital lending market, which is expected to be worth $1 trillion by 2020.

This month, Facebook said that India would be the first country to implement its small business lending programme, which will provide loans to companies that advertise on its platform through a partner. The loans will be available in amounts ranging from 500,000 rupees ($6,720) to 5 million rupees, with interest rates ranging from 17 percent to 20 percent with no collateral required.

The social media giant's entry into India coincides with Xiaomi's plans to offer loans, credit cards, and insurance products in partnership with some of the country's biggest banks and startup digital lenders, according to the Press Trust of India, citing local head Manu Jain. Xiaomi is a Chinese manufacturer of everything from rice cookers to gaming monitors.

This month, Amazon.com made its first investment in the country's wealth management business, investing in a $40 million round led by fintech firm Smallcase Technologies Pvt.

Google, owned by Alphabet Inc., is likewise stepping up its game. After launching wealth management products such as digital gold and mutual funds on its famous Google Pay platform, it has now partnered with local Indian lenders to give users time deposits.

After online transactions soared during the pandemic and traditional lenders became wary due to a rise in bad debt, India's digital payments business has piqued the interest of some of the world's top IT companies. According to Boston Consulting Group predictions, digital financing will triple to $350 billion by 2023 and reach a total of $1 trillion in the five years after 2019.

“The payment sector earns very little money, but lending makes a lot of money,” says the expert "BCG's financial institutions practise managing director and senior partner Saurabh Tripathi remarked. “Indian consumers are looking for better-designed digital experiences, and many companies are taking advantage of this potential."

While India's lending industry has a lot of potential, it also has a lot of hazards. For the second year in a row, the country's bad loan ratio is predicted to grow to 11.3 percent by March, making it the poorest performance among big economies.

The Reserve Bank of India plans to supervise internet lenders, which include more than 300 startups, in addition to dealing with debt collections by digital enterprises.

 

 
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