Budget 2026: NBFCs, Consumer Credit, and the Push to Scale Deeptech Startups

As the Union Budget 2026 approaches, expectations are building across India’s financial services and startup ecosystem for policy signals that go beyond headline allocations and address structural frictions in credit access, consumer finance, and innovation-led growth.

The previous Union Budget had focused on fiscal consolidation while sustaining capital expenditure, with continued focus on infrastructure, MSME credit guarantees, and digital public infrastructure. However, industry experts opine that the next phase requires sharper execution-oriented solutions, particularly for underserved borrowers, retail credit users, and deep-technology enterprises.

In Budget 2025, the government extended support to MSMEs through enhancements to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), expanded Mudra coverage, and maintained priority-sector lending thresholds.

These measures helped sustain credit flow, with MSME credit outstanding growing in double digits year-on-year, even as banks remained cautious in rural and semi-urban markets. The gap has increasingly been filled by non-banking financial companies (NBFCs), which now account for a significant share of last-mile lending to small entrepreneurs.

Deepak Aggarwal, Co-founder, Co-CEO, and CFO of Moneyboxx Finance Limited, said that  Budget 2026 must formally recognise and strengthen this role.

“We expect the government to place rural and semi-urban MSMEs and first-time borrowers at the centre of its financial inclusion agenda. NBFCs have become the primary conduit of formal credit in these markets, supporting agri-allied businesses, services, and small manufacturing units. Establishing a structured refinance mechanism for MSMEs and priority-sector lending would ensure uninterrupted and affordable credit for rural and semi-urban entrepreneurs,” said Aggarwal.

India currently has close to 63 million MSMEs, contributing close to 30 per cent of the country’s GDP, ~45 per cent of exports, and employs over 110 million. Currently, MSME credit outstanding has crossed INR 25 lakh crore, growing at 10-12 per cent YoY, even as credit penetration remains uneven in rural and semi-urban regions.

NBFCs alone account for 20-25 per cent of total MSME credit, and a much higher share of 30-40 per cent of loans to first-time and informal borrowers in non-metro markets. The estimated MSME credit gap still remains at INR 20-25 lakh crore, underscoring the need for structured refinance and priority-sector support, according to a Mavenark report.

“Policy clarity around recovery mechanisms and simplified compliance norms are equally critical to sustain lending momentum without increasing borrower stress. Achieving regulatory and tax parity with banks will enable NBFCs to deploy capital more efficiently at the grassroots. Budget 2026 must acknowledge the systemic role NBFCs play in rural and semi-urban India’s growth story and strengthen them accordingly.”

Expectations in Retail Credit

At the retail level, rapid growth in unsecured lending and credit-card usage has triggered debates around consumer credit health. India’s dept-t0-GDP remains moderate by global standards, but delinquency risks are rising among first time borrowers.

Retail credit has been growing at 15-18 per cent annually, with unsecured personal loans and credit cards among the fastest-growing segments, according to RBI data. Close to 50 per cent of new retail borrowers in the last three years are recorded as first-time formal credit users, many with a limited understanding of interest compounding or credit scores.

According to the RBI, early-stage stress from small-ticket unsecured loans prompted tighter risk-weight norms in recent quarters.

Tanish Sharrma, Co-founder of BillCut, said that the industry looks forward to meaningful policy interventions to address the rising challenges around consumer credit usage and is focused on strengthening awareness of consumer credit in our country.

“The rising dependency on loans and credit cards indicates a requirement for a strong consumer credit awareness, transparent and fairer interest structures, and easier access to refinancing or consolidation options that help borrowers manage repayments more efficiently.

Policy support in the form of incentives, such as tax benefits on interest paid, and the introduction of large-scale financial literacy initiatives will go a long way, helping borrowers break free from high-interest debt cycles. Greater emphasis on credit score awareness is a must,” said Sharma.

Support for Innovation

Beyond credit and retail, innovation-led sectors are also seeking continuity and depth in policy support. While the budget in 2025 maintained allocations for R&D and production-led incentives, deeptech founders continue to face long gestation periods.

Deeptech startups now account for ~20-25 per cent of early-stage startupfunding, up from lowdouble digits five years ago. India currently has more than 3,500 deeptech startups, in areas such as climate tech, advanced materials, space, defence, and industrial systems.

However, deeptech companies typically face 5-8 year commercialization cycles, compared to 2-3 years for software-led startups.

Ankit Kedia, Founder and Lead Investor, Capital-A, said that deeptech, advanced manufacturing, climate systems, and industrial innovation founders are building with greater technical depth, ambition, and global relevance than ever before. Capital and talent are converging, and early validation is increasingly visible beyond just software-led models.

“What now needs attention is the execution layer. Scaling deeptech and manufacturing businesses requires support through long development cycles involving certification, validation, extended pilots, and early deployments, especially in sectors where reliability, safety and trust determine adoption. This is where India has a distinct advantage. The combination of national scale, mission-led government demand, and cost discipline can provide early credibility and rapid learning cycles, enabling domestic companies to emerge as globally competitive suppliers once qualification is complete,” said Kedia.

For this momentum to translate into sustained outcomes, the Union Budget must reinforce this execution ecosystem through shared testing and certification infrastructure, predictable regulatory pathways, and incentives aligned with longer gestation timelines, added Kedia.