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The credit provided by Non-Banking Financial Companies (NBFCs) in India has seen a sharp rise over the years, with NBFC credit to GDP increasing to 26 per cent in FY25, up from 16 per cent in FY19, according to a report by Ionic Wealth.
This growth showed that NBFCs continue to outpace traditional banks and are playing an increasingly important role in India's financial ecosystem. It stated, "NBFC credit to GDP has increased to 26 per cent in FY25, up from approx. 16 per cent in FY19". The report mentioned that the NBFCs have emerged as key lenders to retail borrowers, Micro, Small and Medium Enterprises (MSMEs), and participants in the informal sector, segments that are often underserved by banks. Their importance is growing as they adopt more customer-focused models and maintain a strong reach in both rural and urban areas. The report noted that the share of NBFCs and Housing Finance Companies (HFCs) in the overall systemic credit has increased from 19 per cent in FY20 to 21 per cent in FY25. Their credit contribution is now higher than that of commercial papers and external borrowings in the credit system. Over the period from FY20 to FY25, NBFCs have recorded a credit Compound Annual Growth Rate (CAGR) of 13.9 per cent, outperforming banks which reported a CAGR of 11.4 per cent during the same period. Total NBFC credit reached Rs 48 trillion in FY25 and is projected to grow to Rs 74-77 trillion by FY28, suggesting a CAGR of 15-17 per cent, which is higher than the historical range of 11-13 per cent. Looking ahead to FY2025-26, the report highlighted a positive growth outlook for NBFCs, especially in consumer and SME-focused financial products. Their ability to adapt quickly, maintain strong customer relationships, and cover underserved markets gives them a competitive edge. The report further pointed out that NBFCs are expected to grow faster than banks in several key loan segments. MSME loans are expected to grow by 27-29 per cent, which is 9 per cent faster than banks. With a large and underpenetrated credit gap, better use of formal data through GST, and their deep rural presence, NBFCs are set to play an even bigger role in India's credit landscape. (ANI)
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