PNN
New Delhi [India], July 11: The Indian banking sector has undergone a remarkable transformation with the rise of Non-Banking Financial Companies (NBFCs), which have redefined how credit is accessed and delivered across the country.
Unlike traditional banks, NBFCs have stepped in to bridge the credit gap by offering flexible, tailored financial solutions to segments often overlooked by banks--especially small businesses, rural entrepreneurs, and individuals lacking formal credit histories.
VP Nandakumar, Managing Director of Manappuram Finance, talks about how these dynamic institutions are powering a new era of opportunity with unprecedented growth and inclusion.
The NBFC sector in India has experienced rapid growth and transformation, becoming a key player in the country's financial landscape. As of December 2024, the total credit extended by NBFCs stood at around ₹52 trillion and is projected to exceed ₹60 trillion by FY2026.
By establishing branches in remote locations and leveraging digital platforms, NBFCs provide formal credit options to individuals and small businesses who are typically excluded from the mainstream banking system. Their ability to offer quick, tailored financial products--such as gold loans and MSME loans--caters specifically to the unique needs of small borrowers, enabling them to access funds more efficiently and with greater flexibility than conventional banks can offer.
"Through their innovative, flexible lending models and customer-centric approach, NBFCs are bridging the persistent credit gap, providing timely and tailored financial solutions that empower small businesses, rural entrepreneurs, and individuals." Says VP Nandakumar.
"In doing so, they are not only democratizing access to credit but also driving inclusive growth, fostering economic participation, and transforming lives across the country." He adds.
Technology has also played an important part. By leveraging advanced technology and streamlined processes, NBFCs have made borrowing significantly easier and faster for first-time and small borrowers, who often face hurdles with traditional banks.
The rapid growth of internet penetration in India rising from just 14% in 2014 to over 55% in 2025, with more than 900 million users projected this year has fundamentally transformed how NBFCs operate and serve customers.
"This digital revolution, driven especially by rural growth, has enabled NBFCs to reach deeper into semi-urban and rural markets." Believes VP Nandakumar.
With widespread access to affordable smartphones and high-speed mobile internet, NBFCs can now offer digital onboarding, instant loan approvals, and seamless customer service through apps and online platforms. This not only makes borrowing more convenient and accessible for people in remote areas but also allows NBFCs to use alternative data and technology-driven credit assessments, helping first-time borrowers and small businesses who lack formal credit histories.
NBFCs in India have embraced technology at an unprecedented pace, fundamentally transforming how they operate and serve customers. The sector's digital shift has moved operations from paper-heavy, manual processes to seamless, AI-driven platforms that enable faster, more efficient, and more inclusive financial services.
VP Nandakumar opines "Today, a smartphone and internet connection are often all it takes for customers even in remote areas to access loans, make payments, or complete onboarding in minutes, thanks to innovations like e-KYC, digital wallets, and UPI integrations."
As a result, more people and enterprises are empowered to access formal credit, invest in growth, and participate actively in the formal economy, driving broader financial inclusion and economic development.
The evolution of NBFCs marks a pivotal chapter in India's journey toward financial inclusion and economic growth. As the sector continues to grow, the impact of NBFCs extends far beyond lending; they are shaping a more inclusive, resilient, and dynamic future for the nation. With ongoing innovation and a relentless focus on customer needs, NBFCs are set to play an even greater role in realizing India's $5 trillion economic vision.
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