Empowering Small Business Growth and Enhancing Asset Quality in India: The Vital Role of NBFCs

Updated On : Oct 2023

Small and Medium Enterprises (SMEs) play a pivotal role in India's economic landscape, contributing significantly to employment generation and GDP growth. However, SMEs often face challenges in accessing capital from traditional banks due to stringent eligibility criteria and lengthy approval processes. This is where Non-Banking Financial Companies (NBFCs) step in, serving as catalysts for SME growth and positively impacting the asset quality of their portfolios.

Features of NBFCs helping to Empower SME growth in India:

  • NBFCs: A Tailored Approach
    Unlike traditional banks, NBFCs are more flexible in their approach to lending. They have a better understanding of the specific needs and challenges faced by SMEs. This personalized approach allows NBFCs to design financial products that cater to the unique requirements of small businesses. Whether it's working capital loans, equipment financing, or trade finance, NBFCs offer a range of products tailored to SMEs.
  • Speedy Approval and Disbursal
    One of the most significant advantages of NBFCs for SMEs is the speed at which they process loan applications. Traditional banks may take weeks or even months to approve and disburse loans. In contrast, NBFCs often provide quick approvals and disbursals, enabling SMEs to seize business opportunities promptly. This agility is crucial for SMEs looking to grow and expand in a competitive market.
  • Collateral Flexibility
    NBFCs typically require less stringent collateral requirements compared to traditional banks. This is a game-changer for SMEs that may lack substantial assets to pledge as collateral. NBFCs often consider a broader range of assets, including future cash flows, receivables, and even the business itself, as collateral. This flexibility empowers SMEs to access much-needed funds without putting their valuable assets at risk.
  • Nurturing Financial Inclusion
    NBFCs also play a pivotal role in promoting financial inclusion by reaching underserved and unbanked areas. SMEs in rural and remote regions often face difficulties accessing financial services. NBFCs bridge this gap by extending their operations to these areas, thereby empowering local businesses and contributing to regional development.
  • Risk Management and Asset Quality
    While NBFCs focus on empowering SMEs, they also maintain a keen eye on risk management. They employ advanced analytics and credit assessment tools to evaluate borrowers and maintain a balanced portfolio. This disciplined approach helps in improving the asset quality of their SME portfolios, reducing non-performing assets, and ensuring financial stability.

In conclusion, NBFCs play a crucial role in empowering small business growth and improving the asset quality of SME portfolios in India. Their flexibility, speed, and tailored financial products make them invaluable partners for SMEs looking to thrive in a dynamic business environment. As NBFCs continue to evolve and innovate, their contribution to the growth of the SME sector will remain indispensable, driving economic progress and prosperity across the country.

Digital lending has emerged as a game-changer for NBFCs in India, particularly in the MSME sector. Leveraging technology and data analytics, NBFCs can offer swift and efficient access to credit for small and medium-sized enterprises (MSMEs). This digital transformation streamlines the lending process, reducing paperwork and processing time. It also enables more accurate risk assessment and decision-making, allowing NBFCs to extend loans to a wider range of MSMEs, ultimately fuelling economic growth. With the convenience and speed of digital lending, NBFCs are empowering MSMEs, helping them meet their financial needs and helping entrepreneurial endeavours across India.

Nelito’s FincraftTMIntegrated Lending Management Solution (ILMS) provides automated solutions to support Indian NBFCs, fostering growth. To learn more, write us at

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