India’s financial sector is undergoing a notable transformation, marked by significant shifts in lending strategies and evolving market demands. Two prominent institutions, Fino Payments Bank and Muthoot Finance, are spearheading this change, each leveraging distinct approaches to tap into the growing need for accessible credit.
Fino Payments Bank, renowned for its innovative digital banking solutions, is ramping up its credit disbursement efforts as it moves closer to securing its small finance bank (SFB) license. The bank has seen substantial growth in its deposit base, reporting a 39% year-on-year increase, reaching ₹1,890 crores by the end of the December quarter. Shifting its focus from traditional deposit-based services to credit products, Fino Payments Bank has forged strategic partnerships with various financial institutions to expand its loan offerings, including home, gold, and merchant loans. CEO Rishi Gupta highlighted the bank’s progress, stating, “We have already pushed the pedal on this business, disbursing ₹50 crore-₹60 crore in loans per month, a significant increase from ₹10 crore to ₹20 crore just four months ago.”
The bank has aligned with key players such as IIFL Finance and Muthoot Finance for gold loans, Ugro Capital for merchant loans, and Bajaj Auto Credit and Mahindra Finance for additional lending products. These collaborations are aimed at capitalizing on the growing demand for credit, particularly in rural areas where access to financial services has traditionally been limited.
Meanwhile, Muthoot Finance is capitalizing on the rising popularity of gold loans, an asset-backed lending option that has become more attractive as unsecured loans face growing regulatory scrutiny. Managing Director George Alexander Muthoot emphasized that the surge in gold loan portfolios reflects lenders’ shift away from riskier unsecured loans, driven by regulatory pressure from the Reserve Bank of India (RBI). “The sharp growth in lenders’ gold loan portfolios is not indicative of borrower stress, but rather lenders’ reluctance to expand their unsecured loan segments due to tighter regulations,” Muthoot said.
The RBI and the finance ministry have recently issued warnings to lenders about overexposure to unsecured credit, with some borrowers facing a “cash crunch” rather than financial strain. Muthoot Finance has responded by focusing on secured loans, which offer lower risk and remain appealing to both lenders and borrowers. The company has reported a 30% growth in its portfolio over the first nine months of FY25, exceeding its initial growth target of 15%.
Fino Payments Bank’s strategy also highlights the growing demand for digital banking solutions in India. Gupta emphasized that the bank aims to differentiate itself by focusing on a low-cost, digital-first business model, which offers savings, credit, and payment solutions without relying on traditional branch networks. This approach aligns with the bank’s goal to expand its reach and cater to underserved markets, particularly in rural and semi-urban regions.
With a customer base of 13 million, approximately 40% of whom are active users of the Unified Payments Interface (UPI), Fino Payments Bank is increasingly integrating technology to streamline credit approvals and disbursements. Gupta noted that the bank’s tech-driven platforms allow for swift and efficient lending processes, ensuring that customer engagement remains a key priority.
Both Fino Payments Bank and Muthoot Finance exemplify how the Indian financial sector is adapting to changing market dynamics. By embracing technological advancements and focusing on secure, accessible lending options, these institutions are positioned to meet the growing demand for credit, particularly among underserved populations. As the industry continues to evolve, both banks are poised for growth, demonstrating how innovation and strategic partnerships are reshaping the future of financial services in India.
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