Business financing that leaves banks: Ficci-IBA report

India has an informal workforce with low credit penetration, but the share of new-to-credit loans continues to fall. | Photocredit: Getty images

The bank loan mix has changed considerably over the past 14 years, whereby the share of business advances falls from 58 percent to 36 percent and the company financing that leaves banks, according to a Ficci-IBA report.

The report ‘Mapping of New Frontiers’, compiled by Boston Consulting Group (BCG), noted that corporate financing has been moved to capital markets and alternative financing options (such as private credit and external commercial loans) or structures (such as alternative investment funds and real estate interest).

Furthermore, the mix within bank financing to working capital shifts in the short term compared to the Capex in the long term.

Banks will have to play a dominant role to finance new Capex needed in emerging, sunrise sectors and to finance future infrastructure development, according to the report.

Share of new borrowers

The report noted that India has a large, informal workforce with low credit penetration. However, the share of the loans from Nieuw-to-Kredit (NTC) continues to decrease. At the current rate it will take more than ten years to cover them under formal financing.

Historical achievements show that well-written NTC loans can perform on the same footing with etc. (existing-to-credit) customers, which indicates the space to expand responsible, according to the report.

Formalization -efforts (eg udyam, gst), proliferation of digital payments (UPI, QR codes) and improved coverage through warranty schemes have a high part of NTC lending under MSMEs driven.

For India to achieve his Viksit Bharat goals, BCG has assessed that bank assets should grow with 3-3.5 percentage points faster than its nominal GDP, according to the report.

Digitization driver

The OPEX ratio from the Indian banking sector to assets, according to the report, has increased the worldwide trend in the last 14 years by 26 basic points (BPS).

Despite a decade of digitization, the real productivity gain is limited, with only about 1 percent annual improvement in the past 15 years after correction for inflation and capacity growth, the report explained. With adult deployment of AI/Genai, 35-40 percent of the current activities with low value can be automated.

CS SETY, Chairman, Indian Banks’ Association, said: “India’s digital public infrastructure (IDPI) has triggered a revolution in access via Aadhaar, UPI and Jan Dhan, and the next limit is in DPI 2.0 platforms such as Account Aggregator and Unified Lending Interface.

To unlock their full potential, banks must go beyond transactions and seamless, end-to-end digital experiences to customers who trust, simplicity and omni-channel with the use of Genai as well. By doing this, banks can deepen inclusion, strengthen customer relationships and create a real digital bank ecosystem of world class. “

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Published on August 25, 2025