NBFC Growth in 2025: Leveraging Technology, Policy, and Sustainability
New Delhi [India], December 31: As India enters 2025, Non-Banking Financial Companies (NBFCs) find themselves on the brink of a transformative phase. The sector is poised for growth, driven by technological innovations, supportive government policies, and an increasing focus on sustainability. Industry leaders are optimistic about the future, yet they acknowledge potential challenges ahead that could impact the growth trajectory.
Despite the promising developments, reports suggest that the pace of NBFC growth may slow down in FY25. According to a Nomura report, the strong growth in assets under management (AUM) seen in FY2023 and FY24 appears to be waning, and this trend could persist into FY25. The slowdown is attributed to several factors, including reduced loan disbursements, concerns over the asset quality of unsecured loans (such as personal loans, credit cards, and microfinance), and tightening regulatory oversight.
The Reserve Bank of India (RBI) has also raised concerns over the sector’s heavy reliance on banks for funding. Diversifying funding sources has been flagged as a critical strategy for mitigating risks and ensuring long-term stability.
While challenges such as inflation, geopolitical tensions, and supply chain disruptions in 2024 cast a shadow over the economy, NBFC leaders remain cautiously optimistic about the coming year. Growth opportunities are expected to emerge in key sectors, including Micro, Small, and Medium Enterprises (MSMEs), NBFC financing, and green finance.
MSMEs: A Growth Catalyst for NBFCs
The MSME sector, a cornerstone of India’s economy, has shown remarkable resilience amidst economic challenges. NBFCs are poised to tap into the growing demand for financing in this sector. According to global financial services company Nomura, specific segments like small and medium enterprise (SME) loans, loans against property (LAP), and used vehicle financing are expected to maintain positive growth momentum, despite the overall slowdown.
Navin Saini, Chief Business Officer—MSME and Retail Lending at Arka Fincap, remains optimistic about the MSME financing landscape. He highlighted the importance of proactive risk management, technology adoption, and alignment with government initiatives as key strategies for NBFCs to sustain healthy portfolios in the evolving MSME space.
Embracing Technology and Lowering Costs
Jitendra Tanwar, Managing Director & CEO of Namdev Finvest, emphasized the role of technology in reducing operational costs. He pointed out that NBFCs have been instrumental in advancing financial inclusion, contributing significantly to lending for MSMEs and underserved communities in 2024. In the coming years, leveraging technology will be essential for optimizing costs and enhancing the efficiency of operations.
Ankit Modi, Managing Director of SalaryOnTime, echoed these sentiments, emphasizing the role of digital transformation in reshaping financial services. As India’s economy rebounds, the demand for credit from salaried professionals, alongside growth in retail, MSME, and infrastructure sectors, will drive NBFC growth.
Challenges and Opportunities for Operational Efficiency
Vikkas Goyal, founder of Rupee112, underscored the importance of operational efficiency in navigating the challenges ahead. While opportunities abound, compliance pressures and asset quality concerns will require NBFCs to focus on consolidation and improving operational effectiveness. He also stressed that NBFCs need to diversify their portfolios, balancing growth with risk while forging strategic partnerships with fintech companies and embracing digital lending innovations.
Green Finance and Sustainability: A Bright Future
Sustainability is becoming an increasingly important driver for NBFC growth. The push for green finance is accelerating, particularly in sectors like electric vehicle (EV) financing. India’s growing adoption of EVs, supported by government incentives and subsidies, has led to significant growth in this segment. Nehal Gupta, Founder and Managing Director of Accelerated Money For U, observed that the green finance sector has gained momentum in 2024, with double-digit growth in EV financing, particularly in tier-2 and tier-3 cities.
Real Estate and Home Loan Market: Positive Shift Ahead
The real estate and home loan markets also show signs of positive movement in 2025. Atul Monga, CEO & Co-Founder of BASIC Home Loan, noted that after facing challenges such as high interest rates and rising property prices, borrowers might finally experience some relief. The RBI’s decision to hold rates steady in 2024, coupled with potential rate cuts in 2025, could ease borrowing costs.
Moreover, the government’s focus on affordable housing under PMAY Urban 2.0 is expected to provide significant momentum to urban housing development. On the technological front, home loan processing is on the verge of a digital revolution, promising faster, more transparent, and user-friendly services.
Looking Ahead: A Transformative Year for India’s Financial Ecosystem
As India prepares to enter 2025, the convergence of technological advancements, supportive government policies, and a focus on sustainability promises to reshape the country’s financial ecosystem. The continued evolution of sectors like MSMEs, NBFCs, and green finance presents significant opportunities for growth, but it will require a collaborative effort between regulators, industry stakeholders, and fintech innovators to build a balanced and resilient economy.
NBFCs are well-positioned to play a pivotal role in this transformation, provided they embrace innovation, streamline operations, and align their strategies with government initiatives. 2025 holds great potential for the sector, marking a new era of growth and financial inclusion in India.
