Industry experts assert that the demand for retail and small business credit remains strong, yet lenders are seeking structural support to manage costs, address asset quality issues, and improve recovery timelines—particularly in rural and semi-urban regions.
Credit guarantees are a critical request for micro borrowers and MSMEs
Shubha Bhanu, Associate Partner at MicroSave Consulting (MSC), noted that the sector is looking for relief measures, especially through the introduction of a new credit guarantee scheme to help smaller MFIs expand their reach and assist borrowers.
She mentioned that this initiative would be timely, given the microfinance sector’s challenges over the past year, including localized over-indebtedness, regulatory constraints, portfolio quality issues, and funding difficulties.
Several NBFC leaders also highlighted the necessity to broaden guarantee coverage to enhance credit availability while minimizing lender risk.
Manish Shah, MD & CEO of Godrej Capital, stated that the Budget can facilitate financial deepening by strengthening risk-sharing frameworks like credit guarantees and co-lending structures, which could lower borrowing costs and improve repayment predictability.
NBFCs are calling for refinance windows and enhanced access to long-term capital
Experts predict that the Budget will tackle funding bottlenecks by facilitating access to stable, long-term capital.
Deepak Aggarwal, Co-founder, Co-CEO, and CFO of Moneyboxx Finance, emphasized that the government should prioritize rural and semi-urban MSMEs and first-time borrowers in its inclusion agenda, positioning NBFCs as the main channel for formal credit in these areas. He advocated for a structured refinance mechanism for MSMEs and priority-sector lending to ensure consistent, affordable credit access.
In a similar vein, Ravi Narayanan, MD & CEO of SMFG India Credit, suggested that Budget 2026–27 should concentrate on three structural objectives—liquidity support, recovery mechanisms, and tax relief. He proposed establishing a dedicated refinance window for NBFCs, akin to the National Housing Bank (NHB), and expanding credit guarantee coverage for MSMEs and micro borrowers to reduce funding costs.
In a separate remark, Abhimanyu Munjal, MD & CEO of Hero FinCorp, stated that Budget 2026 offers a chance to reinforce the inclusive credit ecosystem, noting that ongoing policy support for NBFCs—through improved liquidity access, greater availability of long-term capital, and a balanced operating environment—would facilitate enhanced credit flow to underserved segments.
The call for lowering the SARFAESI threshold is a recurring theme
Numerous industry leaders reiterated the necessity of reducing the SARFAESI Act’s minimum loan threshold for NBFCs from ₹20 lakh to ₹1 lakh, arguing that such a change would enhance recovery efficiency and support asset quality.
Bhupinder Singh, Promoter & CEO of InCred Holdings, remarked that India’s retail credit market is experiencing a structural upswing, fueled by increasing consumption and enhanced financial inclusion.
He mentioned that a crucial reform to further bolster the ecosystem would be lowering the SARFAESI threshold for NBFCs to ₹1 lakh, aligning it with housing finance companies (HFCs) to shorten recovery cycles and enhance asset quality.
Narayanan also supported this proposal, indicating that aligning SARFAESI thresholds with those of banks and HFCs would boost recovery effectiveness and mitigate asset quality risks.
The industry calls for regulatory clarity on responsible digital lending
Fintech-related lenders and credit platforms are also seeking clearer policies regarding digital lending, emphasizing the importance of transparency and consumer protection.
Rohit Garg, CEO of Olyv, suggested that the Budget should foster trust, transparency, and access within the formal lending framework. He advocated for consistent policies for digital lending, improved data infrastructure, and continued focus on financial literacy for responsible credit delivery. He also stressed the need for collaboration between fintechs and regulated lenders, with consumer protection as a primary focus.
Joydip Gupta, APAC Head at Scienaptic, pointed out that India must manage credit growth sustainably and healthily through technology-led underwriting.
He mentioned that a robust digital lending infrastructure and analytics-driven credit assessment can allow lenders to scale without incurring undue risks, further stating that support for the responsible application of advanced analytics and fraud prevention can enhance trust within the system.
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Focus on rural livelihoods, women entrepreneurship, and MSME resilience
Leaders in the microfinance sector anticipate that Budget priorities will align with inclusive growth, especially in semi-urban and rural areas.
Aditi Singh, Chief Strategy Officer at Satin Creditcare, expressed that organizations working directly with communities expect continued emphasis on rural livelihoods, women entrepreneurship, and MSME resilience. She pointed to the necessity for more robust backing of credit-linked social security initiatives, expedited transmission of policy rate adjustments, and ongoing advocacy for housing and clean energy to maximize last-mile economic participation.
From an ecosystem perspective, Umesh Revankar, Executive Vice Chairman at Shriram Finance, mentioned that the overarching expectation for the Budget is sustained support for India’s growth objectives with a strong emphasis on execution. He noted that industry discussions have focused on incremental enabling measures, such as enhancing operational efficiency in funding flows, improving access to refinancing channels, and establishing a level playing field in the implementation of SARFAESI, while remaining committed to responsible lending and underwriting practices.
While growth outlook stays steady, microfinance recovery may be uneven
Narayanan noted that overall demand for credit remains robust, but the sector is transitioning into a phase of moderated growth. He anticipates that NBFC AUM growth in FY26 will range between 12–18%, primarily driven by MSMEs, gold loans, and retail credit, while microfinance portfolios may experience a slower recovery of around 4–15% amid asset quality challenges.
Narayanan also highlighted reforms like easing regulations on factoring services and expediting the adoption of TReDS platforms to facilitate quicker working capital cycles for MSMEs.
