NBFCs Drive 50% of New-to-Credit Originations, Expanding Financial Inclusion Across India’s Semi-Urban and Rural Markets

(L-R) Bhavesh Jain, MD & CEO, TransUniuon CIBIL with Raman Agarwal, CEO, FIDC at the launch of the report

• NBFCs have become a powerhouse of credit inclusion, growing their credit-active consumer base by nearly 7 times 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 established themselves as the lender of choice for small-ticket credit, accounting for 47% of loan originations below ₹2 lakh

Non-Banking Financial Companies (NBFCs) have become a major gateway to formal credit in India, accounting for nearly half (47%) of New-to-Credit (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 Bharat Nirman: NBFC Forming the Foundation of Credit Dispersion, a joint report by the Finance Industry Development Council (FIDC) and TransUnion CIBIL.

NBFC Growth Trends

NBFCs have grown steadily over the past decade, with their credit-active consumer base expanding nearly sevenfold and their share of retail loan originations rising from 33% to 43%. At the same time, first-time borrowers accounted for a smaller share of NBFC originations, declining from 28% in June 2016 to 16% in June 2026, showing that NBFCs are increasingly serving borrowers who already have a credit history.

• NBFCs accounted for 43% of retail loan originations by volume
• Share by value stood at 30% in June 2026
• Strong presence in smaller-ticket lending

Smaller-Ticket Lending and Deeper Reach

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.

Semi-urban and rural (SuRu) markets account for more than 58% of NBFC loans by volume.

Changing Composition of Borrower Base

• Semi-urban and rural share rose from 31% to 59%
• Women’s share increased from 18% to 27%
• Credit-experienced consumers rose from 35% to 49%
• Younger consumers rose from 44% to 47%

Executive Commentary

Bhavesh Jain, MD & CEO, TransUnion CIBIL, said: “The NBFC sector has come a long way over the last decade and today plays a much larger role in how credit reaches consumers across India... NBFCs will remain an important part of expanding access, improving credit outcomes and supporting sustainable growth across India’s credit ecosystem.”

Diverse Credit Needs

• Consumption credit increased from 51% to 62%
• Business-oriented credit rose from 4% to 11%
• Vehicle credit declined from 27% to 24%
• Mortgage credit declined from 10% to 7%

Portfolio Quality

• Above prime consumers rose from 24% to 32%
• Delinquency declined from 2.7% to 1.1%
• Credit monitoring consumers rose from 3% to 48%

FIDC Commentary

Raman Aggarwal, CEO, FIDC, said: “The NBFC sector today is far more deeply embedded in India’s credit system than it was a decade ago... This is a more mature NBFC sector, with a larger role in financing enterprise, economic activity and consumption across India.”

Commercial Lending Growth

• NBFC share of credit-active commercial entities rose from 10% to 18%
• NBFC-served entities grew 2.2x vs 1.2x overall market
• Partnership/proprietorship share rose from 73% to 82%
• Low-risk commercial entities rose from 14% to 51%

Future Opportunities

First-time borrower growth is moderating, placing greater focus on deeper relationships, broader product participation, and evolving borrower needs.

About FIDC

Finance Industry Development Council (FIDC) has been the voice and face of the NBFC sector for the last 22 years... RBI recognised FIDC as the Self Regulatory Organization (SRO) for NBFCs and HFCs in India.

About TransUnion CIBIL

India’s pioneer credit information company, TransUnion CIBIL, ensures the credit history of each person and business entity is reliably represented... For more information visit www.transunioncibil.com

Business Loans to Entrepreneurs Grew Faster Than Those to Commercial Entities Over Three Years

• Individual borrower business-oriented loans balances grew 1.8 times between March 2023 and March 2026, outpacing entity borrower balance growth at 1.5 times.
• Substantial scope for expansion in MSME credit access, with nearly 41% commercial enterprises having formal credit access in entity or individual capacity
• Overall commercial portfolio remained stable at 1.8% as of March 2026. The analysis identified emerging signs of risk in specific borrower segme

India’s commercial credit market is seeing a shift in borrower composition, with individual borrowers with business-oriented loans now forming a meaningful share of overall commercial credit balances, according to the latest MSME Pulse released by TransUnion CIBIL and the Small Industries Development Bank of India (SIDBI).

Loans to individuals accounted for 28% of outstanding commercial balances, while loans to entities accounted for 72%. Individual borrower balances grew 1.8 times during the three-year period between March 2023 and March 2026, compared with 1.5 times growth in entity borrower balances during the same period.

The report finds that outstanding commercial credit stood at ₹65.8 lakh crore as of March 2026, across 4.4 crore active commercial trades. This is a year-over-year (YoY) growth of 14% compared to the total outstanding credit of Rs 57.9 lakh crore as of March 2025.

Chart 1: Individual Business Borrowers Credit Profile

Individual Borrowers Form a Sizeable Business Credit Segment

As of March 2026, 2.8 crore individual borrowers had active business-oriented loans. Of these borrowers, 43% were early-stage as commercial entities with credit history of less than 24 months, highlighting a borrower segment that is active in business-purpose borrowing while still being relatively new as commercial entities. Almost half (48%) the share of the total Non-Banking Financial Companies’ (NBFCs) Commercial Balances pertained to Individual Borrowers. All other lender categories have a much lower share, with private banks the second largest at 24% of the commercial balance share among individual borrowers.

The individual borrower segment has been increasingly visible across key commercial credit products. Loans against property formed the largest share of outstanding balances for this borrower group, followed by commercial vehicle loans and unsecured business loans. At a product level, individual borrowers accounted for 68% of loan against property balances, 76% of commercial vehicle balances and 67% of unsecured business loan balances. The report notes that loans against property, commercial vehicle loans, unsecured business loans, term loans, overdraft and cash credit together formed ~87% of outstanding commercial credit balances.

Bhavesh Jain, MD & CEO, TransUnion CIBIL, said: “In India’s MSME economy, the entrepreneur and the enterprise are often deeply connected, particularly in the early years of business growth. A proprietor may borrow in an individual capacity, but the credit is frequently linked to business activity, working capital needs or asset creation. This makes individual business borrowing an integral part of how commercial credit is evolving, and it deserves to be understood within the broader MSME credit landscape.

 
As MSMEs grow, their credit needs also change, from small-ticket working capital to larger, sector-led funding requirements. The real opportunity for the credit ecosystem lies in understanding this progression with greater clarity, especially as borrowers move from individual business borrowing to entity-level credit, or from trade-led borrowing to manufacturing-led expansion.”

Formal Credit Access Remains a Large Opportunity

The share of new-to-credit (NTC) entities in origination volumes declined from 52% in FY23 to 42% in FY26, indicating that the pace of first-time formal credit onboarding has moderated in recent years. 

Chart 2: NTC Opportunity Sizing

NTC originations among commercial entities were concentrated in smaller ticket sizes. The report finds that 60% of these originations were in the ₹2 lakh to ₹10 lakh ticket-size segment, while 34% were in the ₹10 lakh to ₹2 crore segment. It also notes that 75% of ₹2 lakh to ₹2 crore NTC entity borrowers had prior retail credit experience, showing that first-time entity borrowers may enter formal commercial credit through different borrower pathways.

Emerging Pockets Of Risk in Specific Borrower Segments

While overall commercial credit portfolio performance remained stable as of March 2026, the report indicates elevated delinquency levels in certain borrower and product segments. Delinquency (measured as share of balances in 90+ Days Per Due (DPD) or classified sub-standard) in unsecured business loans to entities stood at 7.2%, up 274 basis points (bps) over three years. The ₹2 lakh to ₹10 lakh entity borrower segment recorded delinquency of 5.6%, up 111 basis points over the same period.

Signs of stress were also seen in early delinquencies (measured as accounts ever in 90+ DPD in first 12 months since origination) as well, for both unsecured business loans to entities and for the ₹2 lakh to ₹10 lakh entity borrower segment. For originations in the March 2025 ending quarter, for unsecured business loans to entities, early delinquencies were 2.9 times higher, while for the ₹2 lakh to ₹10 lakh entity borrower segment, early delinquencies were 2.1 times higher than the overall early delinquency of 3.4% for loans to entities originated in the same period.

Sectoral Patterns Point to Different MSME Credit Structures. 

The report shows that commercial credit patterns vary across sectors by exposure size and geography. Textiles, professional services, wholesale trade and infra-linked industries are led by the ₹10 lakh to ₹2 crore exposure segment. Maharashtra and Gujarat the leading states across key industries such as textiles, food processing. The report identifies manufacturing as a sector with strong concentration in industrial clusters.
Trade showed a different pattern, with retail trade anchored in the ₹2 lakh to ₹10 lakh exposure segment and wholesale trade led by the ₹10 lakh to ₹2 crore segment basis share of entities with live loans. Uttar Pradesh ranked first in both retail and wholesale trade counts, while Uttar Pradesh, and West Bengal appeared among the other leading states. In professional services, the report shows a higher share of entities in small exposure segments of ₹10 lakh to ₹2 crore, with Maharashtra, Karnataka and Tamil Nadu among the leading states.

Mr Jain said: “MSMEs remain central to India’s enterprise base, employment creation and regional economic growth. As more small businesses seek formal credit, it is important to recognise the diversity within the MSME segment. A micro enterprise seeking working capital, a trade borrower operating in a local market and a manufacturing unit looking to scale will have different credit needs, business cycles and growth paths. Expanding formal credit access for MSMEs has to go hand in hand with a deeper understanding of these differences. A more granular view across sectors, ticket sizes and geographies can help the ecosystem serve smaller and emerging enterprises while maintaining a focus on sustainable credit growth.”

About TransUnion CIBIL

India’s pioneer information and insights company, TransUnion CIBIL, makes trust possible by ensuring each person and business entity is reliably represented in the marketplace. We do this by providing an actionable view of consumers and businesses, stewarded with care.

We have developed technology and innovative solutions across core credit, risk and advanced analytics. As a result, consumers and businesses can transact with confidence and achieve great things. We call this Information for Good® — and it leads to economic opportunity, great experiences, and personal empowerment for millions of people and commercial enterprises in India.

We serve the financial sector as well as commercial enterprises and individual consumers. Our customers in India include banks, credit institutions, NBFCs, housing finance companies, microfinance companies, telecom companies and insurance firms.

For more information visit www.transunioncibil.com

About SIDBI

Since its formation in 1990, SIDBI has been touching the lives of citizens across various strata of society through its integrated, innovative and inclusive approach for all round development of MSMEs. SIDBI has directly or indirectly through various credit and developmental measures impacted the myriad Micro, Small and Medium Enterprises (MSMEs) in the country, whether they are traditional, domestic small entrepreneurs, bottom-of-the-pyramid entrepreneurs, or high-end knowledge-based entrepreneurs.
For more information, please visit: https://www.sidbi.in/