NBFCs account for nearly half of small loans while delinquencies stay low
Non-banking finance companies (NBFCs), financial institutions that do not have a banking license but provide banking services, are increasingly dominant in the small-ticket loan market, providing nearly half of new-to-credit loans under ₹2 lakh as of June 2026. Despite this rapid expansion, their retail delinquency rate remains below the overall industry average, indicating strong asset quality. The customer base for NBFCs has grown substantially over the last decade.
What this means
This trend confirms NBFCs' growing role in financial inclusion, particularly for borrowers new to the credit system. Their ability to manage credit risk effectively in this segment, as evidenced by lower delinquency rates, suggests robust underwriting practices or strong collections. For traditional banks, this highlights a potential gap in serving smaller loan segments and new-to-credit customers. Banks may need to reassess their small-ticket loan strategies or explore partnerships with NBFCs to tap into this expanding market, which is clearly being served well. Pay attention to how NBFCs maintain this asset quality amidst continued growth.
Most affected: Small-ticket retail lending, NBFCs
Key takeaway: Consider strategies to either compete or collaborate with NBFCs in the lucrative and well-managed small-ticket loan segment.
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