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Some first-time borrowers may find certain non-banking financial companies (NBFCs) more accessible than a conventional bank, especially for small loans or livelihood needs. But evidence from regulated small borrowing in India does not show that NBFCs are every first-timer’s preferred lender, that they approve everyone more easily, or that their loans cost less. The practical answer depends on the lender, loan type, and terms offered.
Why might a first-time borrower approach an NBFC?
NBFCs are a varied group of regulated financial companies, not one standardized loan product. Some specialize in particular borrower groups, smaller loans, or specific purposes. NBFC-MFIs, for example, serve low-income households and small livelihood needs; their reach can include people without long formal borrowing histories.
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A 2026 study by the National Council of Applied Economic Research (NCAER) and Microfinance Institutions Network (MFIN) found that banks’ customers in its regulated small-borrowing sample were older and more often repeat borrowers over time. NBFC-MFIs and small finance banks appeared to be expanding outreach through new relationships, including some with people entering the credit system for the first time. This is evidence about the study’s small-borrowing sample—not every NBFC, bank, or loan product in India. NCAER and MFIN’s study
“New to a lender” does not necessarily mean “new to credit”: a borrower applying to a new NBFC may already have borrowed from another institution. Nor does the study establish that all NBFCs use alternative data, lend without a credit history, or process applications faster.
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What the available figures do—and do not—show
In the NCAER–MFIN study, the overall sample’s average loan amount was ₹51,222 and its average term was 23 months. For the NBFC group, the average amount was ₹46,483 and the average term was 24 months. These are sample figures for regulated small borrowing, not market-wide NBFC averages or statistics for unsecured personal loans. They do not show that NBFC loans are cheaper than bank loans.
The study also reported that borrowers with more than one active loan from the same parent regulated entity accounted for 19.2% of bank borrowers, 7% of NBFC-MFI borrowers, 4% of small finance bank borrowers, and 2.8% of NBFC borrowers in its sample. These figures describe active-loan patterns within that sample; they are not the share of all first-time borrowers.
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Are NBFC loans easier to get or cheaper than bank loans?
There is no general answer supported by the available evidence. Eligibility and pricing depend on the individual lender, the product, the applicant, and the loan terms. A borrower may find a specialized NBFC whose product fits their circumstances, but that does not guarantee approval or a better price.
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RBI-published guidance describes interest pricing by NBFCs as risk-based, with factors such as cost of funds, margin, and risk premium informing the rate model. It also discusses disclosure of the rate and the rationale for risk gradation, with rates expressed annually. That guidance is older; consult current RBI requirements for a definitive statement of rules in force. In any case, it does not establish that an NBFC’s offer will be lower than a bank’s. RBI guidance on NBFC interest rates
How to compare loan offers
Compare the actual lending entity and the complete cost of borrowing, rather than choosing by the “NBFC” label, advertised rate, or monthly instalment alone. RBI’s Digital Lending Directions, 2025, require digital platforms displaying matching offers from multiple regulated entities to present comparable information: each lender’s name, loan amount and tenor, annual percentage rate (APR), monthly repayment obligation, applicable penal charges, and a link to that offer’s Key Facts Statement (KFS). The presentation is to be objective and unbiased. RBI Digital Lending Directions, 2025
| What to compare | What to check |
|---|---|
| Cost | APR and the KFS, including disclosed charges. A headline interest rate or EMI alone may not show the full cost. |
| Repayment fit | Instalment amount and frequency, tenure, and due dates against reliable income and essential expenses. |
| Lender identity | The bank or RBI-regulated NBFC actually making the loan. An app or lending service provider may only be an intermediary. |
| Terms if circumstances change | Late or penal charges, prepayment conditions, and the consequences of missed payments in the KFS and loan agreement. |
| Data and support | What information an app requests and why, plus how to contact the lender’s grievance officer. |
Digital loan protections and app checks
The RBI Digital Lending Directions, 2025, cover digital lending by NBFCs and other regulated entities. They require creditworthiness assessment and a KFS, and provide for digitally signed loan documents and related information to be delivered to the borrower. For digital loans, the Directions also set out protections around consent, data collection, exit options, and complaint handling. Read the RBI Directions
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Check the lender before sharing documents
Identify the regulated lender behind the app or platform and verify that the lender is genuine before sharing KYC documents. An intermediary should identify the bank or NBFC it works for upfront. In a 25 December 2020 warning, the Ministry of Finance’s Press Information Bureau relayed RBI advice to check online lenders’ antecedents and avoid unidentified people or unverified apps. The dated warning also cited reports of hidden charges, aggressive recovery, and misuse of phone data. Ministry of Finance, PIB: RBI caution on unauthorised digital lending platforms and apps
Understand consent and the cooling-off option
Under the 2025 Directions, digital data collection must be need-based and based on prior explicit consent. The rules restrict access to phone resources such as contacts and call logs, while allowing specified one-time access for KYC or onboarding with consent.
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A borrower must have an explicit option to exit a digital loan during an initial cooling-off period by paying the principal and proportionate APR without penalty. The lender’s board sets the period, which cannot be shorter than one day. A reasonable one-time processing fee may be retained only if it was disclosed upfront in the KFS.
Know how to raise a complaint
Before accepting a digital loan, locate the lender’s grievance contact and understand how to submit a complaint. The RBI Directions require accessible complaint mechanisms; the platform is not a substitute for knowing which regulated lender is responsible for the loan.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Frequently Asked Questions
Can I get a loan with no credit history?
The evidence here does not establish a general rule for approval without a credit history. Eligibility varies by lender and product, so check the actual lender’s requirements and terms.
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