India's festive season is traditionally a time of heightened consumer spending, and this year is no different, with a notable increase in the use of microloans to fuel purchases ranging from everyday essentials to luxury items. Fintech startups are witnessing a surge in young shoppers availing themselves of low-interest consumer loans to finance their festive season spending.

Microloans, typically those under ₹10 lakh, are emerging as the fastest-growing loan category, with NBFCs (Non-Banking Financial Companies) commanding a substantial 45% share. This trend is particularly pronounced in Tier 2, 3, and 4 towns, which are expected to drive over 70% of the festive loan demand. States like Maharashtra, Uttar Pradesh, Gujarat, Karnataka, and Tamil Nadu are anticipated to contribute more than 50% of the total business.

The rise in microloan-driven festive shopping is fueled by several factors. The increasing penetration of e-commerce and quick commerce in smaller towns has made a wider range of products accessible to consumers. Moreover, the projected GDP growth of 6.5-7% and moderating inflation (4.5-5%) are boosting consumer spending. E-commerce Gross Merchandise Value (GMV) is expected to reach ₹1.2–1.4 lakh crore, with a 20-25% year-on-year growth led by Tier 2 and 3 adoption.

MSMEs (Micro, Small, and Medium Enterprises) are increasingly relying on digital credit to meet consumer demand during the festive season. FlexiLoans.com, a digital lending NBFC focused on MSMEs, projects a 35-40% surge in loan applications during the festive period, translating to a 40% year-on-year growth in disbursements for FY26. The company anticipates disbursing over ₹1000 Crores, with over 10 lakh applications expected during this period. NBFCs' MSME Assets Under Management (AUM) is projected to exceed ₹5.3 lakh crore by FY26, growing at approximately 20% annually, outpacing banks.

The festive season is witnessing increased hiring in the BFSI (Banking, Financial Services and Insurance) sector due to the high demand for credit cards, microfinance, and consumer loans. Consumer spending during the festive season has led to a 20% job growth in banking and finance. Field Officer Sales, telesales, customer care, field officer sales, and digital collections are experiencing maximum hiring demand in the banking sector during this period.

While microloans are facilitating festive spending, there are concerns about the potential for increased bad loans due to the growth of small-ticket debt. It's important to consider the financial literacy of borrowers to prevent overleveraging. However, microfinance is shifting towards individual loans and self-help groups, which may be less risky than joint liability groups.

Despite these concerns, the festive season presents a significant opportunity for businesses, particularly MSMEs. Small business loans can help businesses welcome more customers by offering special discounts and ensuring they have sufficient stock to meet the increased demand.

Overall, the trend of microloans driving festive shopping in India reflects the growing accessibility of credit and the increasing consumerism in smaller towns. While the economic impact is largely positive, responsible lending and borrowing practices are crucial to ensure sustainable growth and prevent financial distress.