Non-Banking Finance Companies(NBFC’s) will play a crucial role in providing credit to MSME’s. These companies will increase the growth of credit to MSME’s by over 12-14 % in the next 5 years. As of March 2017, overall credit to MSME’s stood at Rs. 16 trillion.

The share of Non-Banking Finance Companies in MSME credit is set to rise to 23 % by March 2022 compared to around 16% in March 2017. NBFC’s cater to niche segments and have a product that is specifically designed for MSME’s. The unmet demand in the MSME segment is estimated to be Rs. 25 trillion in FY2017.

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The NPA for NBFC’s stood at 3% in March 2017, as compared to banks which have an NPA of 8.4%. NBFC’s typically offer low ticket loans to mitigate risk and have a customized credit rating process for MSME’s. These factors allow them to maintain good asset quality.

Source: The Times of India

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