NBFCs Lead First-Time Borrower Lending As Banks Stay Cautious

Non-banking financial companies (NBFCs) have emerged as the primary entry point for India’s first-time borrowers, accounting for over 60% of new-to-credit (NTC) accounts, as banks remain selective in extending loans to customers with no prior credit history, according to a report by rating agency CRIF High Mark.

The shift comes at a time when more Indians are entering the formal credit system, but through smaller, consumption-led products rather than traditional bank-led lending. The report shows that the NTC borrower base has grown to 4.4 crore in the 12 months ending February 2026, up from 3.6 crore four years earlier, indicating a steady expansion of the credit ecosystem.

Yet, this expansion is unfolding alongside a more cautious lending environment. The share of NTC borrowers in total loan originations has declined to 17.8% from 23.5% over the same period, reflecting tighter risk calibration by lenders.

In this gap between rising demand and cautious underwriting, NBFCs have strengthened their position. Their dominance is most visible in entry-level products, where consumer durable loans account for 32% of NTC originations, followed by gold and two-wheeler loans. These categories, typically smaller in size and often backed by collateral or linked to consumption, have become the first touchpoint for borrowers stepping into formal credit.

The data suggests that first-time borrowers are not entering the system through large unsecured loans, but through a gradual build-up of credit exposure. A typical borrower starts with financing for electronics or mobility, establishes a repayment track record, and then moves towards more structured credit products such as business loans, says the report. 

This progression is reflected in repayment behaviour as well, with nearly 67% of NTC borrowers transitioning to low-risk or very low-risk categories within a year.

A closer look at borrower profiles shows that individuals aged 26 to 35 drive the bulk of NTC originations across consumer durables, gold and business loans, pointing to strong credit demand from financially active segments. At the same time, younger borrowers below 25 are more visible in personal loans and two-wheeler financing, indicating early credit adoption linked to consumption needs.

The expansion is also geographically broad-based. Markets beyond the top 100 cities account for more than half of NTC originations across key loan categories, suggesting that credit penetration is deepening in semi-urban and rural regions, where NBFCs typically have stronger distribution reach.

Women borrowers are playing a growing role in this shift. Their share in NTC accounts has risen to 41% from 33% over the past five years, with increasing participation across consumer durable, gold and business loans. States such as Uttar Pradesh, Tamil Nadu and Maharashtra are among the leading contributors to women-led originations.