Minimum Income Requirements: Metro vs. Non-Metro

Most lenders set higher income eligibility in metro cities to factor in the cost of living. For example:

• HDB Financial Services mandates a minimum net monthly income of ₹20,000 in metros, versus ₹15,000 in non-metros. Annual requirements for self-employed applicants also jump from ₹75,000 in non-metros to ₹1 lakh in metros
• IIFL Finance typically sets income expectations starting from ₹22,000 monthly, with metro applicants often needing around ₹25,000
• Lenders like ICICI, Axis, IndusInd, and HDFC usually require ₹25,000 per month for salaried individuals in metros, while non-metro thresholds may be ₹15,000–₹20,000 depending on lender and applicant profile 

Why Higher Thresholds in Metros Matter

Metro residents face elevated expenses for housing, transportation, and daily necessities. This compels lenders to set higher income criteria:

• SMFG India Credit reports a typical metro income minimum of ₹25,000 per month, compared to ₹20,000 in non-metros, due to the difference in living costs
• Tata Capital highlights the cost disparity: in metros a two-bedroom rental or home values significantly more than in Tier-2 cities, justifying higher borrower income expectations

Application Process & Approval Speed: Metro vs Non‑Metro

Yes, applying from a metro city generally leads to faster approval and disbursement thanks to stronger digital infrastructure and a higher focus on app-based lending.

Why Metro Applications Get Approved Faster

• Digital-first processing
  In metro regions, applicants can complete the entire loan process online using apps or lender websites. The strong internet connectivity enables faster KYC, document uploads, and automated verification. This results in approvals in hours or even minutes, especially with fintech platforms and NBFCs.
• Lower dependency on branches
  Unlike non-metro areas where offline branch visits are common due to spotty digital access, metros allow lenders to handle more applications virtually. This removes manual document handling delays and significantly speeds up the review process.

Impact on Approval and Disbursement

• Metro borrowers often receive sanction within a day
  With streamlined digital workflows, metros see quicker decision-making and faster fund transfers, especially when linked to bank accounts with e-mandates.
• Non-metro borrowers face multi-day timelines
  Manual checks and extended verification channels often delay decisions by several days, sometimes a week or more depending on branch workload and documentation completeness.
  

Loan Amounts & Interest Rates: Metro Advantage or Not?

Metro borrowers generally have an easier path to higher loan amounts, thanks to higher incomes and stronger lender presence. But when it comes to interest rates, the advantage is mixed. Sometimes metro applicants get better rates due to competition, but stricter scrutiny and market volatility can balance it out.

Loan Amounts: Metro Residents Often Qualify for More

• Greater Borrowing Capacity
  In metro cities, incomes are typically higher and financial transactions are more visible, so borrowers frequently qualify for larger loan limits. Many lenders cap personal loans around ₹5 lakh, but metro applicants often get offers closer to the maximum amount due to their stronger profiles
• Lenders Adjust Offers by Location
  Institutions tend to scale loan offers based on city-level cost-of-living factors. For example, non-metro applicants may receive smaller sanctioned amounts as lenders assume lower capital needs in those regions
  

Interest Rates: Not Always Lower in Metros

• Strong Competition, But Also Higher Risk Sensitivity
  Metro lending markets are competitive, so some borrowers with good credit might secure lower interest rates. But higher non-performing asset risk and tighter lending norms can offset these advantages.
• Non-Metro Rates Could Be Lower or Higher
  In areas with fewer lenders, interest rates in non-metro cities might be lower due to less margin pressure but some borrowers may face higher rates if financial inclusion programs or credit risk premiums apply
• Interest Determiners Include Credit Score & Debt Ratio
  Regardless of location, credit score, debt-to-income ratio, loan amount, and tenure heavily influence interest rate offers. More favourable terms are likely for documented salaries, stable financial histories, and minimal existing debt.
  

Do Non‑Metro Borrowers Face More Scrutiny?

Yes, loans in non‑metro areas, especially small-ticket loans and new-to-credit borrowers, experience higher default rates, leading lenders to scrutinize those applications more closely.

Rising Default Rates in Non‑Metro India

• Recent data shows defaults on small personal loans (under ₹10,000) were notably higher among borrowers outside the top 100 cities. The delinquency rate climbed sharply as originations expanded in these regions
• A FACE report indicates that Tier‑3 towns had a default rate of around 4.2% and rural areas 4.1%, while metro regions recorded lower defaults around 3.3% through fintech lending channels.

Why Non‑Metro Loan Defaults are Higher

• Credit Inexperience: Many borrowers from smaller towns are new to formal credit. Short credit history (<1 year) borrowers saw default rates up to 5.3%–6.5%, compared to around 2.9% for those with longer credit experience
• Rapid Fintech Expansion: Aggressive personal loan disbursals by NBFCs and fintech firms in smaller cities have increased portfolio risks without established credit behavior patterns
• Economic Stress: Slower economic growth, especially among young borrowers, and vulnerability to regional disruptions has elevated risk in non-metro regions

Impact on Lender Behavior

• Tighter Scrutiny: Lenders now require stronger documentation, higher credit scores, and evidence of repayment capacity from non-metro borrowers.
• Constrained Product Access: Small-ticket loans are now priced more carefully, with stricter criteria, reduced limits, and sometimes higher interest margins.
• Sector Response: Private banks anticipate higher small loan defaults until mid‑2025, though policy tightening introduced in late 2023 is expected to gradually ease stress

Is Credit Flow Shifting Beyond Metros?

No, credit is increasingly flowing into non-metro and semi-urban areas, reducing metro dominance in loan origination and showing the rising influence of financial inclusion.

Metro Credit Share Has Declined

• From March 2020 to March 2025, metro cities’ share of total bank credit dropped from roughly 63–63.5% to around 58–58.7%, based on RBI data. This reflects stronger credit growth in rural, urban, and semi-urban regions
• Despite metros still holding over half of all deposits (around 53.2–53.3% by 2025), loan distribution is shifting toward smaller cities and towns
  

Why More Credit Is Now Going to Non-Metro Areas

• Policy Push for Regional Inclusion: Authorities are encouraging deployment of regional deposits for local development funding, reducing metro-centric loan flows.
• Fintech and NBFC Expansion: Technology-enabled lenders are targeting underserved regions, scaling personal loans in semi-urban areas with alternative credit data.
• Rising Economic Activity in Heartland: Growing small businesses, income streams and credit awareness in non-metro areas are creating increased borrowing demand.
  

Conclusion

It is generally easier to get a loan in metro cities, but the advantages are conditional. Metro borrowers benefit from better digital access, higher incomes, fast approval, and stronger lender competition. At the same time, they face higher income thresholds and live with increased scrutiny, especially as banks tighten credit norms amid rising default concerns.

Meanwhile, non-metro applicants face tougher odds due to limited branch networks and elevated risk perceptions, especially in small-town and rural lending. But the tide is turning: improved fintech outreach, inclusive policies and rising urban-style credit frameworks are narrowing the gap.

Ultimately, whether you’re in a metro or beyond, your approval odds depend on your credit score, income consistency, and ability to manage debt responsibly. The landscape is evolving, but smart strategies can keep you competitive no matter where you live.