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.

Why are first-time borrowers relying on NBFCs?

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 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.”

• 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.

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