The Role of NBFCs in Bridging the Credit Gap for Underserved Segments

Rohit Tiku is the Co-Founder of Abhiyan Capital brings over two decades of leadership experience in the financial services sector, Rohit is passionate about leveraging technology and innovation to drive financial inclusion across rural and semi-urban markets. Under his leadership, Abhiyan Capital has emerged as a trusted partner for underserved entrepreneurs, delivering sustainable growth with disciplined risk management.

In an exclusive interaction with Finance Outlook India, Rohit Tiku, Founder of Abhiyan Capital walks us through the role of NBFCs in bridging the credit gap for underserved segments:

How do NBFCs complement traditional banks in addressing the credit needs of underserved and unbanked segments, particularly in rural and semi-urban areas?

NBFCs serve as critical enablers of financial inclusion by focusing on customer segments largely left out of the formal financial system.

While traditional banks primarily cater to borrowers with documented income, standard collateral, and established credit histories, NBFCs should specialize in addressing the needs of micro-entrepreneurs, informal businesses, and self-employed individuals who are often excluded by mainstream underwriting models.

By designing alternative credit assessment frameworks, leveraging cash-flow-based underwriting, and establishing agile, branch-led distribution networks across Tier 2–6 markets, NBFCs democratize access to credit. Our extensive on-ground presence enables us to serve customers at their doorstep, bridging a critical gap between formal finance and underserved communities.

What are the primary challenges NBFCs face in extending credit to underserved communities, and what innovative strategies have proven effective in overcoming these barriers?

NBFCs encounter multiple challenges, including lack of formal income proof, informal property documentation, fragmented geographies, high servicing costs, and limited financial literacy among borrowers. At Abhiyan Capital, we have adopted a phygital model that combines physical branch infrastructure with centralized, tech-enabled risk controls. Our proprietary aCRE credit scoring model evaluates informal borrowers using alternative data points, while our Smart PD platform digitizes personal discussions to validate creditworthiness.

By leveraging technology, maintaining operational discipline, and offering flexible loan structures, we have been able to achieve a 99% EMI collection efficiency and a delinquency rate (PAR >30+) of just 0.65%, while scaling our outreach sustainably.

How are NBFCs leveraging technology such as digital platforms, AI, and data analytics to enhance access to credit and improve risk assessment for underserved populations?

Technology is a key enabler for modern NBFCs to expand access while maintaining rigorous risk standards. One can deploy AI and machine learning across the credit lifecycle—from underwriting to portfolio monitoring and early risk detection. Smart PD platform and aCRE scorecard facilitate system-driven decision-making based on both structured and informal data points, while our CAMELS-based risk management framework tracks over 34 early warning indicators to enable proactive interventions.

Through innovations like paperless onboarding, automated decisioning, and geo-tagged field verification, NBFCs can significantly improve both customer experience and portfolio quality, ensuring that credit reaches where it is needed most.

What role does the regulatory framework play in supporting or hindering the operations of NBFCs, and what policy changes could further enhance their contribution to financial inclusion?

The RBI has played a constructive role in strengthening governance, liquidity management, and operational resilience across the NBFC sector.

Risk-based supervision, heightened governance standards, and an emphasis on digital innovation have made the sector more robust. However, challenges such as access to low-cost liquidity, capital adequacy norms, and regulatory compliance burdens still limit rapid scaling, particularly for smaller NBFCs.

Policy measures that could further enhance financial inclusion include:

•  Expanding SARFAESI access to more NBFCs by reducing the eligibility threshold criteria

• Simplifying co-lending and securitization frameworks

• Offering priority sector incentives for NBFC-originated loans to underserved segments

A regulatory approach that balances prudential oversight with operational flexibility will unlock the full potential of NBFCs in driving inclusive growth.

Which underserved segments have benefited the most from NBFC-led financial inclusion initiatives, and what measurable impact have these efforts had on economic growth?

Small and micro-enterprises, women entrepreneurs, and rural borrowers have been among the biggest beneficiaries of NBFC-led initiatives. Every ₹4–5 lakh loan typically supports a micro-enterprise that sustains two to five livelihoods, fueling local entrepreneurship, job creation, and rural economic vibrancy. Furthermore, women entrepreneurs, in particular, have benefitted from targeted lending programs, achieving greater financial independence and empowerment.

The cumulative impact is reflected in enhanced business sustainability, employment generation, and the formalization of previously informal economic activity, contributing significantly to inclusive GDP growth.

How can NBFCs effectively collaborate with banks, fintech companies, and government programs to create a more inclusive financial ecosystem?

An integrated financial ecosystem is essential for scaling inclusion efforts. NBFCs offer deep customer insights and last-mile distribution, banks provide balance sheet strength, fintechs bring digital innovation, and government programs offer targeted sectoral support.

So to say, hybrid collaboration models that combine these strengths:

• Co-lending partnerships with banks for risk-sharing and greater reach

• API-driven integration with fintech platforms for seamless onboarding and credit analytics

• Participation in government-backed guarantee and refinancing schemes to lower the cost of funds for borrowers

By creating such synergistic partnerships, we can make credit faster, more affordable, and more accessible to underserved segments.

What measures should NBFCs adopt to ensure the sustainability of their financial inclusion efforts, balancing social impact with profitability?

Sustainability in financial inclusion hinges on combining operational excellence with responsible growth.

Therefore, following a philosophy of "profitable inclusion" is imperative:

• Every branch must become financially self-sustaining within 12–15 months of launch

• Credit underwriting standards must remain uncompromised, regardless of market pressures

• Technology must be used aggressively to drive cost efficiencies and strengthen control mechanisms

• Customer engagement must be transparent, respectful, and ethical

Maintaining strong portfolio quality, disciplined cost management, diversified funding sources, and responsible lending practices ensures that financial inclusion efforts are not just impactful but also commercially viable, creating lasting economic value for all stakeholders.