As the Union Budget 2026-27 approaches, India’s non-banking financial companies (NBFCs) are seeking targeted policy support to sustain credit growth, especially for MSMEs and self-employed borrowers. With the economy aiming for a $5 trillion milestone under the Viksit Bharat 2047 vision, NBFCs say stable funding and regulatory clarity are now critical.
NBFCs Central to MSME and Self-Employed Lending
NBFCs play a vital role in extending credit to MSMEs, micro-entrepreneurs, and self-employed individuals-segments that often struggle to access bank financing. While overall credit demand remains healthy, industry experts say the sector is entering a phase of moderated growth.
NBFC assets under management (AUM) are expected to grow 12–18 percent in FY26, driven by MSME lending, gold loans, and retail finance. However, microfinance portfolios may recover more slowly, with growth estimated at 4-15 percent due to asset quality pressures.
Three Key Budget Priorities for NBFCs
Industry participants say Budget 2026-27 should focus on three structural priorities: liquidity support, improved recovery mechanisms, and tax relief.
On liquidity, NBFCs have called for a dedicated refinancing window, similar to the support housing finance companies receive through the National Housing Bank. They have also sought wider credit guarantee coverage for MSMEs and micro borrowers to reduce funding costs and expand credit access.
“A dedicated refinancing window and broader credit guarantees can significantly lower funding costs and improve credit availability for smaller enterprises,” an industry expert said.
Faster Recovery Mechanisms in Focus
Improving recovery efficiency is another key expectation. NBFCs have urged the government to align the SARFAESI Act threshold with that applicable to banks and housing finance companies.
Currently set at ₹20 lakh, reducing the threshold to ₹1 lakh would speed up recoveries and help NBFCs manage asset quality risks more effectively, experts said.
Tax Relief to Ease Cash-Flow Pressures
Tax relief is also high on the sector’s wish list. Industry experts have called for the removal of the 10 percent tax deducted at source (TDS) on NBFC interest income, arguing that it creates cash-flow constraints and ties up lending capital.
“Removing the 10 percent TDS on NBFC interest income will ease cash-flow pressures and support higher lending capacity,” the expert said.
Improving MSME Cash Flows and Long-Term Funding
NBFCs have also sought policy measures to improve working capital cycles for MSMEs. Easing regulations around factoring services and accelerating adoption of the Trade Receivables Discounting System (TReDS) could help small businesses get paid faster and reduce liquidity stress.
Access to stable, long-term funding would also enable NBFCs to expand infrastructure and green financing, deepen formal credit penetration, and support sustainable growth, industry experts added.
What NBFCs Expect from Budget 2026-27
With Budget 2026-27 just days away, the NBFC sector is hopeful that targeted policy measures will strengthen India’s financial ecosystem and accelerate the country’s transition towards a developed economy.