India’s personal loan market in 2025 looks very different from the easy‑money years of the last decade. Growth in unsecured personal loans has slowed sharply as banks respond to RBI’s risk warnings, yet the overall number of loans keeps climbing because NBFCs and fintech lenders are filling the gap at record speed. For borrowers, this “slow but booming” reality means approvals are still available, but the source, pricing and conditions of personal loans are shifting in ways that will shape their entire credit journey in 2026.
Banks are getting cautious, NBFCs are getting busy
Regulatory pressure and risk concerns have forced banks to cool their aggression on unsecured retail credit. RBI’s prudential measures to curb over exposure in cards and personal loans have already pulled growth in unsecured personal credit down to nearly half its earlier pace, with banks carrying higher capital requirements and tighter underwriting filters for new customers. As a result, personal loan origination value from banks has either flattened or declined, even as total market size crosses an estimated 15 lakh crore rupees.
NBFCs, especially digital and fintech focused ones, have moved into this space with remarkable scale. Recent analyses show that NBFCs now account for around 41 percent of new personal loan value and well over 70 percent of volumes, after growing their share dramatically in just a couple of years. Fintech NBFCs alone sanctioned close to 11 crore personal loans in FY25, often small ticket amounts below 25,000 rupees, using alternative data and app based journeys to serve customers banks either ignore or treat conservatively.
“When banks tap the brakes on personal loans, NBFCs do not stop. They simply change lanes and accelerate.”
What smart borrowers and advisors should do next
For a borrower in 2026, the biggest question is not “Can I get a personal loan?” but “From whom and on what terms?” Bank loans increasingly favour stable, higher income profiles with clean histories and larger ticket sizes, which can offer lower rates but come with more documentation and stricter screening. NBFC and fintech loans, on the other hand, promise speed, flexibility and access for thin file or non salaried borrowers, but often at a higher cost of funds and with more sensitivity to short term stress in repayment behaviour.
This is where advisory becomes an important filter, not just a sales funnel. Matching the right borrower to the right lender now requires understanding product purpose, income stability, future credit goals and the long term impact of high cost unsecured borrowing on home loan or business loan eligibility. Used thoughtfully, the new personal loan reality can still work in a borrower’s favour, with advisors helping them use NBFC speed when needed and bank stability when it matters, instead of letting impulsive app approvals dictate their entire financial story.
