New-to-credit customers from NBFCs surge to 50% in a decade

What this means

NBFCs (non-banking financial companies, which are financial institutions that do not have a banking license but provide banking services) are becoming the primary gateway for many Indians to enter the formal credit system. This is a double-edged sword: on one hand, it signifies greater financial inclusion and broader access to credit, especially in rural and semi-urban areas where NBFCs have a stronger footprint. On the other hand, it means a larger proportion of new borrowers are starting their credit journey with entities that may have different underwriting standards and risk profiles compared to traditional banks. Banks should note this as a potential pool for future customers, but also as an area where credit quality and regulatory oversight for NBFCs will be critical to prevent systemic risks as more NTC borrowers come onboard through this channel.

Most affected: NBFCs, Financial Inclusion, Retail Credit Growth

Key takeaway: NBFCs are critical for credit penetration; banks should consider their strategies for acquiring and managing these newly credit-active customers.