NBFCs Demand Budget 2026 Reforms for Growth

As Budget 2026 approaches, the Finance Industry Development Council (FIDC) has presented significant recommendations to the Indian Finance Ministry, advocating for crucial reforms to enhance the Non-Banking Financial Companies (NBFC) sector. These proposals aim to address funding constraints and operational challenges that currently hinder the industry's growth trajectory and its ability to support key economic sectors.

The FIDC's primary demand is the establishment of a dedicated refinance window, a move they consider essential for diversifying funding options and reducing borrowing costs. NBFCs are increasingly vital in lending to MSMEs, EVs, and green assets, now accounting for 25% of total bank credit. Lowering the SARFAESI Act's recovery threshold from ₹20 lakh to ₹1 lakh is another critical request, intended to empower NBFCs with more effective recovery tools and alleviate court backlogs.

Further recommendations include the removal of Tax Deducted at Source (TDS) on interest income paid to NBFCs, which currently imposes compliance burdens without significant government revenue gain. The council also advocates for extending Section 80E deductions for education loans to those disbursed by NBFCs, ensuring parity with banks. While officials offered a patient hearing, no firm commitments were made regarding these demands.