Bridging dreams with support: The new age of responsible lending

Field-driven NBFCs are transforming lending from a purely transactional model to one rooted in purpose and impact – becoming case studies proving borrower success and strong portfolios go hand in hand.

- MAYUR MODI

A reading of India's recent Economic Survey indicates that rural and semi-urban areas are demonstrating increasing credit appetite. Overall, the lending landscape is transitioning towards a purpose-driven financial services model, reflecting the industry's genuine commitment to borrower welfare and sustainable economic development.

The paradigm shift encompasses inclusive credit policies, comprehensive borrower support, and long-term relationship building, particularly targeting underserved segments including rural MSMEs and first-time borrowers who traditionally faced barriers in accessing formal financial services.

IMPERATIVE FOR RESPONSIBLE LENDING PRACTICES

India's credit landscape faces significant challenges that demand innovative solutions beyond conventional banking approaches. Recent data reveals concerning trends in credit defaults, with sub-prime lending by public sector banks rising substantially backed by government guarantees, indicating underlying vulnerabilities in current lending models. Simultaneously, the possibility of credit card defaults highlights risks associated with unsecured lending without adequate borrower support systems.

The financial inclusion gap remains substantial despite technological advances and regulatory initiatives. Traditional lending institutions often employ standardized assessment criteria that fail to capture the nuanced financial behavior and repayment capacity of rural borrowers. This approach excludes millions of potential borrowers who lack conventional credit histories but possess viable income sources and business prospects. The challenge is compounded by inadequate financial literacy, limited awareness of formal financial products, and cultural barriers that prevent effective engagement with institutional lenders.