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Indian fintechs seek a share of booming loan market through NBFC route

After the central bank tightened its digital lending guidelines in September, fintech companies have started to acquire small NBFCs or seek NBFC licences.

May 17, 2023 / 20:20 IST
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Indian fintechs seek a share of booming loan market through NBFC route

Fintech companies are looking at entering the lending business by acquiring small non-banking financial companies or getting NBFC licences as they seek to deploy their expertise and experience in a growing credit market.

Experts said the trend gained momentum after the Reserve Bank of India tightened digital lending rules in September 2022 and banned the First Loss Default Guarantee (FLDG) model, which allowed fintech companies to compensate for a certain percentage of defaults in the loan portfolios of partner banks or NBFCs.

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“Fintechs now have the market share, geographical and network reach across the country and different customer segments under their current business,” said Varun Sharma, managing partner at FinGuru, a consultancy company. “These companies want to foray into lending to different sectors as they see the demand is high and they have the means to do so.”

In the past few months, fintech companies have either acquired small NBFCs or sought an NBFC licence from the RBI.