A new industry report has highlighted a major shift in India's credit landscape: non-banking financial companies now originate half of the country's new-to-credit borrowers, compared with just 24% in June 2016. The finding, drawn from a TransUnion CIBIL-FIDC study covering about 2,000 NBFCs, points to the expanding reach of shadow-banking lenders in bringing first-time borrowers into the formal financial system.
The data is significant because new-to-credit, or NTC, customers are often the hardest segment to serve. They typically lack a credit history, formal borrowing record or established banking relationship, making them difficult for traditional lenders to underwrite. NBFCs have increasingly stepped into that gap, using more flexible underwriting models, wider distribution networks and product structures tailored to customers outside the mainstream banking ecosystem.
NBFCs Expand Credit Access
The report suggests that NBFCs have become a critical channel for financial inclusion in India, particularly in smaller towns, semi-urban markets and among borrowers seeking small-ticket loans. Their growing share of NTC customers reflects a broader structural change in the way credit is delivered across the economy. Rather than relying solely on banks, a larger portion of first-time borrowers is now entering the system through non-bank lenders.
This shift has implications beyond lender market share. It indicates that India's formal credit universe is widening, with more households and small businesses gaining access to loans that can help smooth consumption, finance education, purchase assets or support micro-enterprises. For policymakers, that expansion is generally viewed as a positive sign of deeper financial inclusion, especially in a country where a large section of the population has historically remained outside formal credit channels.
At the same time, the rise of NBFCs in the NTC segment also raises questions about credit quality, borrower resilience and the sustainability of rapid loan growth. First-time borrowers are often more vulnerable to income shocks and may have limited understanding of repayment obligations. That makes responsible lending, robust collection practices and accurate risk assessment especially important as NBFCs deepen their footprint.
Inclusion Meets Risk
The report arrives at a time when India's credit market is balancing two competing priorities: expanding access and preserving asset quality. NBFCs have long played a counter-cyclical role in the financial system, serving borrowers that banks may consider too small, too informal or too risky. Their ability to reach underserved customers has made them indispensable to India's retail credit growth.
But the same flexibility that allows NBFCs to serve new borrowers can also expose them to higher default risk if underwriting standards weaken or if economic conditions deteriorate. The challenge for the sector is to maintain growth without compromising the quality of the loan book. That is particularly relevant in the NTC segment, where borrowers may have no prior repayment track record for lenders to assess.
The TransUnion CIBIL-FIDC findings also reflect the increasing sophistication of NBFC lending models. Many lenders now use alternative data, digital onboarding and technology-driven assessment tools to evaluate borrowers who would otherwise remain invisible to the formal system. This has helped broaden access while reducing dependence on traditional collateral-based lending.
For the broader economy, the trend is a reminder that India's credit expansion is no longer being driven only by large banks. NBFCs are now a central part of the transmission mechanism that connects households and small firms to formal finance. Their growing role in the NTC segment could support consumption and entrepreneurship, but it will also require close monitoring from regulators and lenders alike to ensure that inclusion does not come at the cost of stability.
The report's most striking message is not simply that NBFCs have gained market share, but that they have become the primary entry point into formal credit for millions of Indians. That makes them increasingly important to the country's economic trajectory, especially as policymakers seek to deepen financial access while keeping the system resilient.