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

Analysts Warn: Convenience Has a Credit Quality Cost

The risk embedded in this growth story has not escaped regulators or analysts. 

FY25 saw stress in the unsecured book intensifying, with slippages and write-offs at a three-year high, driving a rise in Stage 2 and Stage 3 assets and higher provisioning in unsecured loans. 

Fast approvals and thin underwriting for small-ticket borrowers carry a delinquency tail that becomes visible only in downturns.

Looking forward, NBFC loan books are likely to rise 15–17% in FY26, with NBFCs holding sharp digital tools and solid risk controls positioned as real standouts in India's changing credit scene. 

Banks that want to reclaim ground must move toward embedded finance models partnering with retailers and fintechs rather than competing head-on with institutions structurally built for speed.

Conclusion

The consumer durable loan market is not shrinking it is simply moving to faster hands. Banks that cede this space entirely risk losing a generation of first-time borrowers to NBFCs. Rebuilding relevance here means embracing fintech partnerships and rethinking what small-ticket credit can look like.

FAQs

Is a credit card really worth all the benefits? 

Credit cards are worth the benefits if you pay the balance in full every month to avoid high-interest debt, making them valuable for cash back, reward points, fraud protection, and building credit. 

Can I use a consumer durable loan for both online and offline purchases, or is it only available for in-store purchases?

Yes, you can use a consumer durable loan for both online and offline purchases.