Why NBFCs have become the option of choice for many first-timer borrowers — Explained

A higher proportion of new-to-credit (NTC) customers are choosing non-banking financial companies (NBFCs) to make their foray into the borrowing space, according to a joint report by the Finance Industry Development Council (FIDC) and TransUnion CIBIL.

The report titled ‘Bharat Nirman: NBFC Forming the Foundation of Credit Dispersion’ found that a growing number of first-time borrowers start their credit journey with consumption products and are serviced mainly by NBFCs.

Raman Aggarwal, CEO of FIDC noted that the NBFC sector today is far more deeply embedded in India’s credit system than it was a decade ago. “Its strength has always been the ability to respond to markets that require flexibility, whether that is a household in a smaller town, a first-time borrower or a small business looking for capital. We are now seeing that capability translate into greater scale across emerging states and a stronger presence among nano and micro enterprises,” he added.

According to the report, the answer is access. “NBFCs have played a pivotal role in expanding formal credit access, consistently driving growth in NTC consumer originations. As of the latest period, they bring in close to half of NTC consumers into the formal financial ecosystem,” it added.

As per the data, of the lender mix data for live NTC consumers as of June 2026, as many as 74% of first-timer borrowers have only used NBFC credit, while 10% have used non-NBFC and 16% have accessed both.

Smaller-ticket lending and deeper reach have helped build this scale, as per the report. It highlighted:

• NBFCs have built a strong presence in smaller-ticket lending. Loans of up to ₹2 lakh account for 82% of consumer credit industry origination volumes, and NBFCs contribute 47% of originations in this segment, compared with 17% for banks.
• Their reach is also strong beyond large urban centres. Semi-urban and rural (SuRu) markets account for more than 58% of NBFC loans by volume, putting them nearly on par with banks at 60%.

“NBFCs have successfully broadened credit access beyond traditional customer segments, driving strong participation from women (over 9 percentage points), credit monitoring (over 45 percentage points), credit-experienced borrowers (more than 14 percentage points), and SuRu geographies (over 28 percentage points),” it added.

Among these demographics, comparing data over a 10-year period from June 2016 to June 2026, showed a growth in 7share of NBFC credit active consumers as follows — Women from 18% to 27%, younger investors 44% to 47%, credit experienced from 35% to 49%. It added, “Deeper geographies and credit awareness have driven this growth.”

• According to the report, NBFCs have become a powerhouse of credit inclusion, growing their credit-active consumer base by nearly 7x over the past decade — approximately 2.5 times faster than the overall credit industry.

• NBFCs continue to expand access across the credit spectrum, while leading lending to below prime consumers, who make up 35% of their credit-active consumers base
• NBFCs) have become a major gateway to formal credit in India, accounting for nearly half (47%) of NTC consumer originations as of June 2026.
• Today, 36% of credit-eligible consumers have accessed credit through an NBFC, while 46% of all credit-active consumers hold an NBFC loan, according to the report.

According to Bhavesh Jain, MD and CEO of TransUnion CIBIL, the next phase will be about building deeper and longer relationships with customers as their credit needs evolve over time. “Credit information, stronger consumer awareness and a wider range of lending solutions will become increasingly important in making those relationships more meaningful,” he added.

Jocelyn Fernandes is a journalist and editor with nearly 13 years of experience covering the business, corporate, economy and markets beats in news.<br> As chief content producer for around three years at Livemint (Hindustan Times), Jocelyn publishes breaking stories, explainers, features and live blogs on a range of business and economy topics, including the Budget, corporate developments, stock markets, income tax, money and personal finance, cryptocurrency, government policy, impact of US tariffs, international developments and more.<br> Jocelyn's writing philosophy is focused on delivering news in an accurate and accessible format for readers. She thus focuses her news coverage on explainers and FAQs in order to breakdown business, corporate, economic, and policy topics that are of importance to everyday readers.<br> She holds a Bachelors in Mass Media (BMM) and Post Graduate Diploma (PGD) in Journalism and Communication and has previously written for online business and markets news site Moneycontrol (Network18), Business-to-business (B2B) trade publications — the industry magazines Power Today and Solar Today (ASAPP Media), and the national news agency United News of India (UNI).<br> Outside of work, Jocelyn keeps up-to-date with local and international news, enjoys reading fiction books, novels and short stories, and enjoys movies, travelling and art. <br> She can be found on X and LinkedIn, and reached by email: <a href="jocelyn.fernandes@htdigital.in">jocelyn.fernandes@htdigital.in</a> <br> X/ Twitter handle: <a href="https://x.com/scribeJocelyn">@scribeJocelyn</a> <br> LinkedIn: <a href="https://in.linkedin.com/in/jocelyn-fernandes-journalist">LinkedIn</a>

Get Latest real-time updates

Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

✕

Wait for it…

Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.