NBFCs Achieve Remarkable Surge in Credit Growth, Surpassing Banks in FY25: BCG Report

Location: New Delhi
Date: June 11, 2025

NBFCs Lead Credit Growth in FY25 Amid Economic Shifts

In a significant development in India’s financial landscape, Non-Banking Financial Companies (NBFCs) have recorded a remarkable surge in credit growth, outperforming traditional banks in the first half of fiscal year 2025, according to a comprehensive report by Boston Consulting Group (BCG). This shift reflects evolving consumer preferences and strategic adaptation by NBFCs in catering to underserved markets.

NBFCs Credit Growth Surpasses Banks’ Lending Performance

The BCG report highlights that NBFCs experienced a credit growth rate of over 20% year-on-year in FY25 so far, substantially outpacing the 14% growth recorded by banks. This robust expansion comes on the back of targeted lending in high-demand sectors such as microfinance, vehicle loans, and small business financing.

The focus keyword NBFCs credit growth is central to this transformation, showcasing a clear trend where these financial institutions are becoming the preferred source of credit for a wide range of borrowers, particularly in Tier 2 and Tier 3 cities.

Strategic Lending Drives NBFCs Credit Growth

The positive trajectory of NBFCs credit growth is attributed to their ability to adapt quickly to market demands, coupled with technology-driven underwriting models and personalized loan offerings. Unlike banks, which often remain conservative in risk assessment, NBFCs are leveraging alternative credit scoring and digital platforms to tap into previously neglected customer bases.

The report points out that digital adoption, customer-centric models, and fast disbursal mechanisms have played a crucial role in boosting NBFCs credit growth, especially in rural and semi-urban areas where banking penetration remains low.

Banks Face Challenges Amid Rise in NBFCs Credit Growth

While banks continue to maintain a strong presence in corporate and housing loans, their pace of retail lending has been moderate. With the rise of fintech-backed NBFCs offering swift and easy credit access, banks are now under pressure to innovate and streamline their own lending processes to stay competitive.

According to BCG analysts, “The current trend in NBFCs credit growth underscores a shifting paradigm in India’s credit ecosystem. Traditional lenders must re-evaluate their outreach and embrace digitization to match the agility of NBFCs.”

NBFCs Credit Growth Signals Economic Recovery

The strong performance in NBFCs credit growth also reflects signs of an overall economic recovery and growing consumer confidence. Increased demand for personal and business loans indicates a resurgence in consumption and entrepreneurial activity, particularly among MSMEs and rural enterprises.

Moreover, regulatory support from the Reserve Bank of India (RBI), such as relaxed norms for co-lending and liquidity windows, has further empowered NBFCs to scale up their operations without compromising risk standards.

Outlook: Sustained Momentum Expected in NBFCs Credit Growth

Looking ahead, industry experts predict that NBFCs credit growth will continue its upward trajectory throughout FY25, potentially closing the year with a 22-24% overall increase. Factors such as the festive season, rural credit push, and expansion of digital lending platforms are expected to sustain this momentum.

However, maintaining asset quality and managing rising operational costs remain critical challenges. NBFCs will need to strike a balance between aggressive expansion and prudent risk management to ensure long-term sustainability.

Conclusion

The surge in NBFCs credit growth in FY25 marks a defining shift in India’s financial services industry. As these institutions continue to innovate and expand their reach, they are reshaping the credit landscape and offering meaningful competition to traditional banks. The ongoing trend is likely to promote greater financial inclusion and diversified credit access across the country.