The Indian credit story is undergoing a transformation, and not just because of higher repo rates, tightening regulations, or growing fintech lending. At the core of the next phase of retail credit growth is how institutions handle loan collections.
For NBFCs, particularly those operating in Tier 2 cities and beyond, this is not just about chasing overdue payments. It is about shaping a long-term ecosystem of trust, financial inclusion, and scalable credit delivery. Because how we collect today will determine who we can lend to tomorrow.
NBFCs and the Credit Inclusion
India’s formal credit penetration is still catching up. According to a CRISIL report, NBFCs are expected to log a 14–16% CAGR in assets under management (AUM) between FY23 and FY25, driven by demand for MSME loans, personal loans, and used vehicle financing. Most of this growth will originate from borrowers underserved by traditional banks.
NBFCs have already played an important role in bridging the credit access gap. But as we go deeper into underserved territories, rural India, first-time borrowers, the self-employed, the challenge is no longer just origination. It is how we underwrite risk without formal documentation, and how we maintain borrower engagement once credit is disbursed. This makes loan collection not a backend function, but a front-line strategic capability.
Collections Are the Foundation for the Next Loan
Historically, loan collection was seen as a cost centre, a process managed by field agents with targets. But in the post-COVID world, the relationship between lender and borrower has evolved. Borrowers expect to be treated fairly and with empathy. At the same time, lenders need strong mechanisms to ensure capital recycling.
A borrower’s experience during the collection phase, especially in difficult times, can influence their lifetime value. In a digital-first environment where Gen Z borrowers may take loans as easily as they order food, the need for consistent, transparent, and respectful collection strategies cannot be overstated.
Progressive NBFCs are now investing in smarter collections. This includes:
- AI-driven early warning systems that flag repayment stress well before an EMI is missed
- Digital nudges in vernacular languages that gently remind borrowers without sounding punitiveFlexible restructuring models for small borrowers affected by seasonal income cycles
- Integrating collection performance into risk-based pricing models for future loans
These innovations not only reduce NPAs but also build borrower loyalty, a currency more valuable than high interest margins.
Digital Infrastructure
The rise of India Stack, Aadhaar-linked eKYC, and UPI has helped NBFCs onboard customers faster. But these digital rails also offer powerful tools for collections. Auto-debit mandates via UPI, reminder integrations with WhatsApp, and real-time dashboards for field agents have transformed recovery operations.
When built on digital infrastructure, collections become not just efficient, but also auditable, compliant, and scalable.In a country with over 700 million smartphone users, the key is not whether digital collections are viable, but whether they are empathetically designed and locally relevant.
Rural Credit Story Will Be Won or Lost on Collections
With over 65% of India’s population in rural areas and less than 15% penetration of formal credit, the opportunity is enormous. But so is the risk. In rural economies where income is seasonal, documentation is sparse, and financial literacy is low, traditional collections do not work.
NBFCs will need to rethink recovery models; integrating financial literacy as part of the post-disbursal journey, building local partnerships to aid recoveries, and tailoring collection schedules to agrarian or cash-based income cycles.
Moreover, digital collection tools must be optimised for low-bandwidth regions and include voice-based support in regional languages. Ignoring these realities risks derailing the very inclusion we aim to drive.
Regulation and Reputation
As NBFCs scale, so does regulatory scrutiny. RBI’s recent guidelines on fair practices in loan recovery are not just checkboxes; they are a signal that borrower dignity is now non-negotiable. Reputation risk is real. Social media makes every interaction visible. A single bad collection experience can create virality that is hard to undo.
It is time we stop treating loan collection as a compliance chore and start seeing it as a reputational asset. A differentiated, respectful collection strategy will be the brand.
Also Read: Empowering Businesses through Microfinance: A Grassroots Economic Revolution
It is tempting to focus on disbursal growth, market expansion, and credit innovations. But none of that sustains without robust collections. In fact, India’s next credit revolution will not be defined by how fast we lend, but by how wisely, ethically, and efficiently we recover. If India is to realise the full potential of retail credit, we must start by reimagining how we collect.
Views expressed by: Artem Andreev, CEO of FincFriends (Captive NBFC of RupeeRedee)
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