In an exclusive interaction with Finance Outlook India, Pinank Shah, Chief Executive Officer of Capital India Finance Limited (CIFL), shares his insights on the evolving landscape of MSME financing in India and the pivotal role of NBFCs in reshaping credit access. He discusses how new-age NBFCs are leveraging technology and alternate data to move beyond traditional, relationship-based lending, enabling faster, scalable, and data-driven credit decisions for underserved MSMEs.  With over two decades of experience in financial services, he brings deep expertise in treasury, corporate finance, and strategic growth across leading institutions such as Indiabulls Housing Finance, Dhani Loans and Services, and HDFC Limited. At CIFL, he has been instrumental in steering the company’s transformation into a future-ready, technology-driven NBFC with a diversified portfolio exceeding Rs 1,000 crore in AUM.

How are NBFCs transforming MSME lending in India through innovative credit models, compared to traditional banks?

NBFCs can broadly be seen in two categories — traditional players and those that have embraced technology. The latter, often referred to as new-age lenders, are reshaping MSME financing by moving away from relationship-driven and bureau-dependent models toward faster, data-driven, and structured credit solutions. By leveraging alternate data and advanced technology, these NBFCs are able to underwrite business cash flows with speed and scalability. This approach allows them to profitably serve segments that banks typically avoid due to unfavorable unit economics and servicing challenges.

What role does a phygital (physical + digital) approach play in expanding financial access for underserved MSMEs and retail borrowers?

The phygital model blends the speed and efficiency of digital tools with the trust and assurance of physical presence. On the digital side, it enables seamless onboarding, real-time checks, data capture, and automated credit scoring — all critical in a competitive lending environment. On the physical side, branch and field touchpoints foster customer trust, strengthen risk profiling, enable on-ground KYC, and provide last-mile support. At Capital India, we see this balance of technology with human engagement as vital to expanding access for underserved MSMEs and retail customers — ensuring greater accessibility, transparency and long-term loyalty.

With Capital India Finance crossing ₹1,000 crore in AUM, what does this milestone indicate about the evolving demand for structured credit solutions in India?

The demand for structured credit in India is rising, supported by strong GDP growth, increasing business activity, and supportive government measures. Capital India Finance crossing Rs 1,000 crore in AUM reflects the strong foundation built over the past two years and the opportunities available for focused lenders with niche underwriting expertise and disciplined growth. This milestone highlights both growing investor confidence and rising customer demand for tailored credit solutions.

Also Read: Indian MSMEs Accelerate Adoption of Digital Finance Tools

What challenges do NBFCs face in underwriting MSME and professional loans, and how is deep credit assessment expertise helping mitigate risks?

The primary challenge lies in accurately evaluating a borrower’s true cash flows and aligning them with the appropriate product, funding requirement, and repayment capacity. Reliance on bureau data alone is insufficient to capture the full picture. To address this, NBFCs are increasingly leveraging alternate data sources, technology, and advanced analytics to enable sharper credit decisions, real-time cash flow tracking, portfolio monitoring, and agile policy adjustments.

At the same time, human judgment remains indispensable. Interpreting nuanced customer scenarios, understanding business behaviour and factoring in local market conditions require the expertise of seasoned credit professionals. This blend of data-driven insights with deep credit assessment expertise allows NBFCs to mitigate risk while delivering informed, customer-centric lending solutions.

How will regulatory changes, digital adoption, and rising credit demand shape the future growth trajectory of NBFCs serving MSMEs and retail segments?

Three forces will shape the next phase of growth. First, regulation—tighter governance and liquidity norms will strengthen the industry and give well-managed NBFCs a clear edge. Second, digital adoption—greater use of data and automation will reduce information asymmetry and expand the addressable market. And finally, rising credit demand—India’s MSME and retail segments are growing rapidly, and NBFCs with innovative products, strong risk controls, and phygital reach with deeper understanding of local conditions are well-positioned to grow faster than the system average.