Why Most Borrowers Are Choosing NBFCs Over Banks

What if your next personal loan doesn't come from a bank? What if it's from a non-banking finance company and you don’t even visit a branch? That’s not just a possibility now. It’s already happening. By the end of 2025, most borrowers in India will move away from traditional banks and lean towards NBFCs.

NBFCs have started attracting borrowers at a pace banks can’t keep up with. The numbers say it all. As of December 2024, the total NBFC credit in India was close to ₹52,00,000 crore. In just one year, this figure is expected to cross ₹60,00,000 crore. 

That’s more than a ₹8,00,000 crore jump in under 12 months. The growth isn’t random. It’s backed by speed, flexibility, and tech that banks still don’t use right.

NBFCs Aren’t New, But Now They’re Everywhere

Earlier, NBFCs were limited to certain areas. Now, they’re active in every tier-II and tier-III city. Local kirana shop owners, salaried youth, gig workers – everyone has started trusting NBFCs more. You get fast loans. You get fewer documents. And you don’t need to wait for a bank manager's nod.

Let’s see what’s really pulling borrowers in.

More Borrowers Choose NBFCs for Faster Retail Lending

NBFCs are making their biggest mark in retail lending. Compared to banks, NBFCs give loans faster and with less paperwork. Today, 48% of NBFC credit goes into retail, compared to only 34% for banks. This gap shows just how focused NBFCs are on individual borrowers.

Why does this matter?

Read More - NBFCs No Longer ‘Shadow Banks
 

Because India has changed, more people now borrow to buy phones, finance weddings, fund travel, or start small businesses. They don’t want to stand in line or wait days for an answer. That’s where NBFCs win. 

Some approve in minutes, and disbursement happens in less than 48 hours.

Let’s Compare It Side by Side

That 1-2% higher interest is fine for many people if they get quick cash in hand.

Fintech Makes It Easy

NBFCs that use mobile apps and web platforms have grown their base threefold in two years. One of the biggest players gave out 8.3 crore small loans worth ₹81,365 crore in just nine months. These aren’t big home loans. These are ₹5000 to ₹1,00,000 loans for emergency needs, marriage bills, repairs, or travel.

And guess what? Most borrowers repaid without delay, so trust is now shifting completely in favour of NBFCS.

Digital Lending: The Biggest Push Factor for 2025

Online NBFCs are no longer an option but often the first choice. With Aadhaar-based eKYC, digital signatures, and UPI-linked disbursement, most NBFCs can approve and send money in less than a day.

You don’t need to step out. You just fill a form. Upload PAN, Aadhaar. Use DigiLocker. And you’re set.

Personal Loan Journey

Let’s take a salaried employee earning ₹35,000 per month.

For just ₹156 extra per month, you avoid the 5-day wait. That’s why NBFCs get more traction daily.

Key Techniques Used by NBFCs

• Pre-approved lending using an alternate credit score
• Behavioral analytics
• Video KYC with facial recognition
• Real-time document checks
• Dynamic interest rate engine

These tools make it easy to lend even in areas where banks don’t have branches.

MSME and Gig Economy Borrowers Prefer NBFCs

One of the biggest silent shifts has happened in business lending. MSMEs (micro, small and medium enterprises) and gig workers are moving fast towards NBFCs.

Banks still want 3 years of income proof, GST returns, audits, and what not. NBFCs don’t.

For example, a kirana store owner who wants ₹1,50,000 for expanding the shop can get it from NBFCs within 3 days. The same loan from a bank? Minimum 2 weeks.