NBFCs account for nearly half of small loans while delinquencies stay low

Non-banking finance companies (NBFCs) contributed nearly half of new-to-credit loans under Rs 2 lakh by volume, as reported by TransUnion CIBIL and the Finance Industry Development Council in a recent study. Despite this significant presence, NBFCs maintained a low retail delinquency rate of 1.1%, compared to the industry average of 1.3%.

Approximately 82% of loans originated in India were for amounts below Rs 2 lakh, with NBFCs accounting for 47% of these originations, while banks accounted for 17% and other lenders for 36%. Small-ticket credit accounts for a substantial portion of credit activities in the retail lending market, with 97% of loans originated in India falling under the Rs 10 lakh mark.

Credit monitoring by borrowers plays a crucial role in improving their repayment history, as evidenced by a 4% higher cure rate (52% vs. 48%) for those who actively monitored their credit profiles. This trend has gained momentum, with the percentage of credit-active NBFC customers monitoring their credit profiles increasing from 3% in June 2018 to 48% in June 2026.

The growth of NBFC customer base has outpaced the overall credit industry, growing nearly sevenfold between June 2016 and June 2026, while outstanding balances increased more than fivefold. Raman Aggarwal, the chief executive of FIDC, attributed this improvement in asset quality to tighter underwriting, improved borrower information, increased credit awareness, and greater repayment discipline.

By June 2026, about 11 crore borrowers held active credit relationships with NBFCs, with 36% of credit-eligible consumers having accessed credit through an NBFC at least once, and 46% of all credit-active consumers holding an NBFC loan.