As the Union Budget 2026-27 draws closer, expectations are mounting across India's non-banking financial company (NBFC) sector, which plays a critical role in funding small businesses, micro-entrepreneurs and the self-employed.
With India aiming for a $5 trillion economy and the long-term vision of Viksit Bharat 2047, industry participants say targeted policy support in the upcoming Budget will be essential to sustain credit growth and strengthen the country's financial ecosystem.
NBFCs: Backbone of MSME and Self-Employed Credit
NBFCs remain a key source of financing for MSMEs and self-employed borrowers, segments that often face challenges in accessing formal bank credit. While overall demand for loans continues to remain healthy, the sector is expected to witness moderation in growth in the coming year.
According to an industry expert, NBFC assets under management (AUM) are projected to grow between 12% and 18% in FY26, driven primarily by MSME lending, gold loans and retail credit.
"As India progresses towards its $5 trillion economy ambition and the Viksit Bharat 2047 goal, NBFCs will be central to maintaining credit flow to MSMEs and self-employed segments," the expert said.
However, microfinance portfolios may see a slower recovery, with growth estimated in the range of 4% to 15%, largely due to asset quality pressures.
Budget 2026: Three Key Priorities for NBFCs
The NBFC sector has outlined three structural priorities for the upcoming Budget - liquidity support, stronger recovery mechanisms and tax relief.
1. Liquidity Support and Credit Guarantees
On liquidity, the expert suggested the creation of a dedicated refinancing window for NBFCs, similar to the refinancing support available to housing finance companies through the National Housing Bank (NHB).
He also called for expanding credit guarantee coverage for MSMEs and micro borrowers, which could help reduce funding costs and improve credit access for smaller enterprises.
"A dedicated refinancing window for NBFCs, along with wider credit guarantee coverage, can significantly lower funding costs and enhance credit availability for small businesses," he said.
2. Faster Recovery Mechanisms a Key Ask
Improving recovery efficiency is another major expectation from Budget 2026. The industry has sought alignment of the SARFAESI Act threshold for NBFCs with that applicable to banks and housing finance companies.
Currently, NBFCs can invoke SARFAESI only for loans above Rs 20 lakh. Reducing this threshold to Rs 1 lakh, the expert said, would significantly improve recovery timelines and help mitigate asset quality risks.
3. Tax Relief: Call for Removal of 10% TDS
Tax-related relief also features prominently in the NBFC wishlist. The sector has proposed the removal of the 10% TDS on interest income earned by NBFCs, arguing that the current provision creates unnecessary cash-flow constraints.
"Removing the 10% TDS on NBFC interest income will ease liquidity pressures and free up capital for higher lending," the expert noted.
Improving MSME Cash Flows and Future Growth
NBFCs are also seeking policy support to improve MSME working capital cycles. Measures such as easing regulations around factoring services and accelerating the adoption of TReDS platforms could help MSMEs receive payments faster and reduce liquidity stress.
In addition, access to stable, long-term funding would enable NBFCs to expand support for infrastructure and green financing, deepen formal credit penetration, and promote sustainable growth.
"These reforms can strengthen infrastructure and green finance, deepen formal credit access, and ensure NBFCs continue to drive inclusive and sustainable economic growth," he said.
Budget 2026-27: Industry Awaits Policy Push
With Budget 2026-27 just weeks away, the NBFC sector remains hopeful that targeted fiscal and regulatory support will reinforce India's credit ecosystem and accelerate the country's journey towards becoming a developed economy.
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