With the Union Budget 2025 on the horizon, prioritizing the strengthening of digital infrastructure is essential to simplify credit accessibility and ensure the broader goals of financial inclusion.
We are optimistic that the budget will introduce initiatives to make credit more accessible and affordable, especially for lower-middle-class consumers in the consumer durables segment”a key pillar of India`s consumption economy. Measures such as incentivizing digital lending, reducing borrowing costs, and offering targeted subsidies, liquidity support, or tax benefits for consumer durable financing could empower this demographic. These steps would not only to bridge the credit gap, but also enhance purchasing power and elevate living standards, driving overall economic growth.
To sustain this progress, it is necessary to improve liquidity provisions for NBFCs, particularly those operating in the underserved and underbanked market segment, for seamless credit delivery. The NBFC sector would be significantly benefited from reforms such as more effective loan recovery mechanisms, expanded access to multi source KYC, and taxation reforms, including the harmonizing TDS provisions between banks and NBFCs and offering incentives for lending to underbanked and unbanked. Furthermore, improving liquidity and encouraging co-lending arrangements between NBFCs and banks by resolving agreement ambiguities would be highly beneficial.
Facilitating robust risk mitigation mechanisms”such as credit guarantee schemes and tailored regulatory frameworks”would also enable NBFCs to operate more effectively and expand their reach. Additionally, promoting financial literacy through targeted programs would help consumers make informed credit decisions, fostering responsible borrowing habits. These measures would also encourage innovation and enhance financial security alongside promoting the goals of financial inclusion and economic resilience.
The adoption of emerging technologies like AI and Machine Learning, Blockchain and advanced cyber security solutions hold an immense potential to accelerate entrepreneurship and innovation. By strengthening the digital lending ecosystem, these technologies can enhance operational efficiency, reduce risks, and establish a solid foundation for sustained economic growth.
Ondrej Kubik, CEO, Home Credit India