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NBFCs Dominate Small Loans: Credit Access Soars
6 Oct
Summary
- NBFCs provide nearly half of new loans under Rs 2 lakh.
- Retail delinquency for NBFCs is lower than the industry.
- Credit monitoring boosts borrower repayment rates significantly.
As of June 2026, non-banking finance companies (NBFCs) are leading the market for small loans, providing almost half of all new credit below Rs 2 lakh. These loans represent a significant portion of India's retail lending, with 82% of originations being under this amount. NBFCs are outpacing banks, accounting for 47% of these small-ticket loans.
The asset quality within NBFCs shows improvement, with a retail delinquency rate of 1.1%, which is lower than the broader industry's 1.3%. This positive trend is partly attributed to enhanced credit monitoring by borrowers. Studies show that customers who monitor their credit, especially those with subprime scores, experience better cure rates, with 52% becoming current within 12 months compared to 48% for non-monitors.
NBFCs have experienced substantial customer growth over the past decade. Between June 2016 and June 2026, the number of credit-active NBFC customers grew sevenfold, with outstanding balances increasing more than fivefold. This rapid expansion, about 2.5 times faster than the overall credit industry, signifies broadening access to financial services.
