NBFCs Demand Budget 2026 Support: Liquidity, Tax Relief Top List
Overview
India's non-banking financial companies are urging the government for key policy interventions in Budget 2026-27 to sustain credit growth. Their demands focus on enhanced liquidity through a dedicated refinancing window and expanded credit guarantees for MSMEs. Additionally, they seek faster recovery mechanisms via SARFAESI Act alignment and tax relief by removing TDS on interest income, aiming to bolster lending capacity and support the nation's $5 trillion economy target.
NBFC Sector Seeks Budget 2026-27 Boost
The Indian non-banking financial company (NBFC) sector is pressing for crucial policy support in the upcoming Budget 2026-27, aiming to sustain credit growth and contribute to India's ambition of a $5 trillion economy.
Credit Flow to MSMEs
NBFCs are vital for providing credit to micro, small, and medium enterprises (MSMEs), micro-entrepreneurs, and the self-employed, segments often underserved by traditional banks. While overall demand is robust, the sector anticipates moderated growth. SMFG India Credit Co. Ltd. Managing Director and CEO Ravi Narayanan projects NBFC assets under management (AUM) to grow 12-18% in fiscal year 2026, driven by MSMEs, gold loans, and retail lending. However, microfinance portfolios face slower recovery, with growth estimated at 4-15% due to asset quality pressures.
Calls for Liquidity and Recovery Reform
Narayanan outlined three key priorities for the Budget. First, enhanced liquidity through a dedicated refinancing window for NBFCs, mirroring facilities for housing finance companies. Expanded credit guarantee coverage for MSME and micro borrowers is also sought to lower funding costs and improve credit availability. Second, improving recovery mechanisms is paramount. NBFCs advocate for aligning the SARFAESI Act threshold with that of banks and housing finance companies, reducing it from ₹20 lakh to ₹1 lakh to enhance recovery efficiency and mitigate asset quality risks.
Tax Relief and Working Capital
Third, tax relief is on the agenda, with a call to remove the 10% Tax Deducted at Source (TDS) on NBFC interest income. This would ease cash-flow constraints and free up capital for lending. The sector also desires policy support for working capital cycles, including easier regulations for factoring services and accelerated adoption of TReDS platforms, to ensure faster payments for small businesses. Access to stable, long-term funding is further stressed for supporting infrastructure and green financing initiatives, deepening formal credit penetration and fostering sustainable economic growth.
