NBFCs Emerge as the Top Choice for First-Time Borrowers, Report Finds

What this means

This data confirms a long-held belief: NBFCs are doing the heavy lifting of financial inclusion at the grassroots level. While banks often focus on larger, salaried customers in cities, NBFCs have built a business model around underwriting risk for smaller, often self-employed borrowers in underserved regions. They are essentially creating the credit histories that will allow these customers to eventually access a wider range of financial products, including from banks. For banks, this makes NBFCs both a competitor for initial customer acquisition and a crucial partner in the ecosystem, as they provide a pipeline of credit-tested future clients. The trend also underscores the importance of co-lending models between banks and NBFCs.

Most affected: Retail credit & financial inclusion

Key takeaway: Banks should view the thriving NBFC customer base as a future pipeline for cross-selling more complex products like mortgages and credit cards once these borrowers mature.