Swipe, Don't Borrow: How Credit Cards and NBFCs Are Squeezing Banks Out of Consumer Durable Loans

Key Insights

• Indian banks are steadily retreating from consumer durable loans as NBFCs led by Bajaj Finance, with a 54% market share by disbursements and credit card EMI products make the segment increasingly uneconomical for traditional lenders to compete in.
   
• Earlier regulatory action in November 2023 saw the RBI briefly ban Bajaj Finance from its “eCOM” and “Insta EMI Card” products for non-compliance with digital lending norms; restrictions were lifted in May 2024 after remediation.

A Quiet but Decisive Shift in Who Finances India's Appliances

The consumer durable loans segment is expected to grow at a CAGR of 21%, reaching ₹205 billion in FY2026–27 from ₹84 billion in FY2020–21. 

Despite that growth, banks are not the ones capitalising on it. NBFCs faster, leaner, and built for small-ticket credit have taken the wheel. 

Bajaj Finance alone commands a staggering 54% market share in the consumer loan space by loan disbursements, a dominance banks have found structurally difficult to challenge.

The short-term implication is a narrowing revenue stream for banks in retail consumer credit. Long-term, the consequences are more structural. 

In FY25, NBFCs powered by fintech processed 76% of personal loan volumes, with the average loan size at just nearly ₹10,000 a ticket size banks typically skip, but NBFCs use technology and data analytics to scale efficiently. 

As credit cards absorb no-cost EMI demand and NBFCs serve the rest, banks risk becoming bystanders in the fastest-growing consumer credit segment.

Who Lends What And at What Scale

The table below captures the lending landscape across consumer durable financing channels in India.

NBFCs bounced back faster than banks after the RBI hiked risk weights on unsecured consumer loans in November 2023, tightening credit checks, forming co-lending partnerships, and managing risk while continuing to grow. 

Banks, constrained by capital requirements and risk frameworks, never recovered their momentum in the small-ticket space.

For India's Middle Class, Competition Means Better Deals at the Checkout Counter

The real winners in this rivalry are consumers. 

Consumer durable lenders offer easy approvals with minimum documentation, KYC via mobile numbers, no-cost EMIs, no security or down payment, and tenures ranging from 3 to 60 months. 

A family in Indore buying a washing machine or a refrigerator on EMI today faces far fewer barriers than a decade ago. THE GEOSTRATA

Credit cards have further democratised access. 

Interest rates on consumer durable credit range from 12–22% across players, and no-cost EMI structures subsidised by the retailer or manufacturer effectively reduce the real cost to zero for creditworthy buyers. 

This financing ecosystem has meaningfully accelerated appliance penetration in Tier-2 and Tier-3 cities. THE GEOSTRATA