How fair and transparent loans will help NBFCs and small businesses grow by 2047

For many borrowers, their first encounter with formal finance may be through an NBFC. If that experience is undermined by hidden fees, ambiguous stipulations, or high interest rates, then the loan intended to facilitate empowerment can instead lead to distress.

Fair lending means more than administering the loan amount. It means responsible lending: evaluating the borrower’s repayment capacity, ensuring clarity in terms, and maintaining dignity during collections. Responsible lending ensures the well-being of both borrower and lender. It creates the foundation of trust.

The Tangible Benefits of Responsible Lending

There is evidence to support what we have assumed all along. NBFCs that have formalized responsible lending processes have vastly improved their portfolio quality. Gross NPAs across the sector decreased from 6.4% in 2021 to 3% in 2025, and return on investment increased from 1.2% in 2021 to 2.4% in 2025. Both Gross NPA and ROI are indicators of resilience, capital accessibility, and confidence among all stakeholders.

Fair lending lowers delinquencies and increases borrowers’ lifetime value. When borrowers are treated with fairness and transparency, they consistently meet their obligations—a benefit for all stakeholders.

Trust as the Foundation of Growth

Trust is the foundation of sustainable growth in financial services. When a small business or household trusts their lender as a reliable partner, they return—creating repeat credit, savings, and financial literacy opportunities. Scaled over time, this can change communities and create jobs, particularly in semi-urban and rural India.

NBFCs are well suited to bridge the trust gap. Our hyperlocal and doorstep approach and flexibility afford us the opportunity to provide last-mile access to finance. But finance at the last mile must always be delivered with integrity and transparency—the long-term impact should always come before short-term benefit.

Strengthening the Ecosystem Through Collaboration

To extend affordable credit more efficiently, we need to broaden relationships with the banking system. Co-lending arrangements, as previously defined, present an excellent opportunity—banks provide capital and regulatory compliance, while NBFCs offer reach and local expertise. Together, we can provide credit that is affordable to individuals who previously had no access to the formal lending system.

If we are to collaborate, we need to center collaboration on strong processes. Creating standardized digital onboarding, building interoperability across platforms, and establishing clear risk-sharing protocols are critical to scaling an effort with large sustainability potential.

Risk Management: A Strategic Imperative

With fast growth comes the need for more sophisticated risk management procedures. Lending decisions must be based on data, not intuition. Whether addressing credit risk, liquidity gaps, or asset-liability mismatches, we must invest appropriately in internal governance frameworks for long-term survival.

Through internal controls, NBFCs can shield themselves from uncertain futures and gradually transform into full-fledged financial institutions grounded in transparency.

Looking Ahead to 2047

In India, a robust, inclusive, and ethical credit system is a mark of national progress. It’s a transformation in which NBFCs will play a critical role.

By lending fairly and transparently, we empower individuals and enterprises, building trust and resilience. Such trust and resilience will contribute meaningfully to India’s inclusive growth story.

The road ahead calls for responsibility, collaboration, and foresight. Let us keep growing with integrity, serving with empathy, and building for tomorrow—one loan, one life, one community at a time.

(Ajeet Kumar Singh, Co-Founder & Managing Director of SAVE Solutions Pvt Ltd.)

Views are personal and do not represent the stand of this publication.