Fintechs, especially in the lending space, are hopeful of a revival in credit growth after the Reserve Bank of India (RBI) went for a larger-than-expected 50 basis point cut, bringing down the repo rate down to 5.5 percent.
Most of the fintechs in the lending space cater to the unsecured segment, with small-ticket personal loans accounting for a large share of the portfolio.
On June 6, RBI's Monetary Policy Committee (MPC) decided to cut repo rate by 50 bps to 5.5 percent from 6 percent earlier. Repo rate is the interest rate at which the RBI loans money to commercial banks. The jumbo rate cut comes after two successive rate cuts of 25 bps each in February and April.
“The RBI’s 50 bps rate cut is a strong signal of its intent to support credit-led consumption. Such bold moves have historically been reserved for periods of economic reset and this could mark the beginning of a fresh credit cycle,” said Anup Agrawal, co-founder of Kiwi, a credit card platform on Unified Payments Interface (UPI).
The reduced cost of funds is expected to benefit card issuers, enabling them to expand access and offer more attractive credit products, he said.
In the past 12-18 months, several fintechs have struggled to raise funds as banks found it difficult to get deposits, resulting in a high interest rate regime despite the regulator easing some of the lending norms to ease liquidity.
Many fintech executives attributed the situation to a large amount of public savings going to equity investments.
“Rate cut cycles do lead to a jump in unsecured lending. There is also more margin in the profit and loss account to lend from,” said Prakash Sikaria, founder of UPI and credit app super.money.
Another challenge that fintechs have been facing is the rising non-performing assets (NPAs) in the small-ticket loans. Worried about bad debt, the RBI has nudged financial institutions to slow down the growth in the segment.
Several large private sector banks such as IndusInd Bank and Axis Bank, many NBFCs, and several small finance banks are facing a rise in NPAs.
"For digital lending platforms, rising credit demand presents a massive opportunity, but scaling will require strong underwriting and real-time risk assessment," said Kushal Rastogi, founder and CEO of Knight Fintech, a banking technology infrastructure firm.
Concerns remain
There are also some concerns about the speed of transmission of lower interest rates to NBFCs and fintechs, with some expecting this to happen in a quarter, while a few others expect this to take six months.
“This should help increase the availability of funds and reduce the cost. However, these actions take some time to trickle down,” said Alok Mittal, co-founder of Indifi Technologies.
However, some founders are still not convinced about the speed of transmission.
“While the rate cut is a welcome signal, it is too early to say if it will actually ease credit access on the ground. Banks may still be cautious in passing on the benefits, especially in co-lending models where operational friction and risk-sharing concerns remain unresolved. Unless transmission improves, fintechs may not see a meaningful impact in terms of easier or cheaper credit," said a co-founder of an MSME lending company, who did not wish to be identified.
Some are worried that the RBI’s stance changing from “accommodative” to “neutral” dims the chances of more rate cuts.
“Any further action will depend on how inflation and growth dynamics evolve from here,” said Vijay Kuppa, CEO, InCred Money.
MSMEs to benefit
However, one sector that is expected to benefit is the MSME sector.
“There is likely to be increased credit demand from MSMEs, especially in sectors where delays in receivables are a major bottleneck. This is the right environment for financial institutions to double down on digitising their lending operations,” said Raja Debnath, co-founder and CEO at Veefin Group.
India’s MSMEs are grappling with rising input costs, uneven credit access and evolving trade dynamics. While this move supports credit flow, the “neutral” policy stance underscores limited monetary space and a greater reliance on structural solutions.
"SaaS fintechs and NBFCs must now drive credit access through AI-led underwriting and alternative data models. Ensuring this policy transmission reaches micro and underserved businesses will require deeper alignment between digital infrastructure and economic priorities,” said Rohit Arora, CEO and co-founder, Biz2X and Biz2Credit.
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