Inside This Article
In the past decade, India’s financial landscape has witnessed a major shift. At the heart of this change are fintech companies, using technology to make financial services faster, easier, and more accessible than traditional banks.
In this blog, we explore why so many fintech founders are choosing a different path to scale their offerings by opting for an NBFC license. Here’s why this option is growing in popularity:
- Empowers Lending and Investment: With an NBFC license, fintech companies can give loans and make investments directly, without needing approval from a traditional bank. This gives them more freedom and control over how they serve their customers.
- Fuels Innovation: The regulatory structure allows fintechs to create cutting-edge financial products.
- Expands Market Access: Startups can serve underserved or unbanked populations more easily.
- Faster Time-to-Market: Getting an NBFC license takes less time and effort than getting a full banking license. This means fintech companies can start offering their services to customers much sooner.
- Enables Proprietary Solutions: Fintech companies can create their own ways to give loans, check who is eligible, and offer the best service. They use smart tools like mobile apps, artificial intelligence (AI), and data analysis to make these decisions. This helps them offer better user experiences, improve their services, and grow faster than traditional companies.
- Offers Operational Agility: Unlike traditional banks, NBFCs are more flexible and adaptable to market demands.
This licensing route has become a key part of India’s growing digital finance ecosystem. It helps startups easily lend money, make investments, and build new financial products—all at a much faster pace than traditional methods. It’s a faster, more flexible option for fintechs to enter the market and grow their offerings quickly.
Getting an NBFC license helps fintech companies take full control of how they offer financial services. They can create their own lending systems to match customer needs, use smart tools like AI to check credit risk quickly, and adjust easily to any rule changes.
As more people in India use smartphones and go online for their everyday needs, there’s a growing demand for simple and easy-to-use financial services. Traditional banks often take more time and follow stricter rules, which can slow things down. On the other hand, NBFCs are faster, more flexible, and more open to using technology.
That’s why many fintech companies prefer getting an NBFC license. It helps them:
- Launch their services quickly without waiting too long.
- Reach more customers, even in areas where banks are not easily available.
- Use modern technology to create user-friendly financial products.
- Grow their business faster without relying on a bank partnership.
In short, an NBFC license gives fintech startups a quicker and smarter way to succeed in the financial world.
What is an NBFC?
Non-Banking Financial Companies (NBFCs) are financial organizations that work a lot like banks, but without a banking license.
They are registered under the Companies Act, 2013. NBFCs can give loans, make investments, and help people manage their money. However, they are not allowed to take regular deposits like savings or current accounts from the public.
Read more: What is an NBFC?
NBFC vs Traditional Banks: Key Differences
- No demand deposits (NBFCs can’t accept savings/current accounts)
- Lighter compliance framework
- Faster innovation adoption
- Flexible loan structuring
These features make an NBFC structure highly attractive to agile, growth-driven fintech companies.
Know More: How are NBFCs Different from Banks?
Why FinTechs Prefer NBFC Licensing
1. Regulatory Flexibility
NBFCs follow rules, but they are not tightly controlled like banks. This means they have enough regulation to build trust, but also enough freedom to quickly create new and useful financial products.
2. Faster Go-to-Market Strategy
Obtaining a NBFC license is more achievable than a full banking license. For fintech startups looking to launch lending or credit-based services quickly, the NBFC route is practical.
3. Lending Without a Bank License
Most fintechs enter the market to offer credit-based solutions like short-term loans, BNPL, or microcredit. With an NBFC license, they can do so legally without partnering with a bank at the outset.
4. Customizable Business Models
NBFCs can offer different kinds of loans, such as personal loans, small business loans, vehicle loans, and home loans. This helps fintech companies focus on what their customers really need and make financial products just for them.
Key Advantages of NBFCs for FinTechs
- Lending at Scale: With RBI approval, NBFCs can issue loans directly.
- Collaborative Models: Fintechs can partner with traditional banks in co-lending setups.
- Low Capital, High Impact: NBFCs can run lean operations with technology-first models.
- Technology-Driven Growth: From automated KYC to AI-powered risk assessment, fintech-NBFCs lead with tech.
Popular Use Cases in FinTech
- Digital Lending Platforms
- Buy Now Pay Later (BNPL)
- SME Financing Solutions
- Microcredit and Microfinance
- Consumer Durables Loans
These are areas where tech-led innovation meets regulatory freedom—an ideal space for a fintech to grow using an NBFC license.
Regulatory Considerations
Fintechs must still comply with RBI’s evolving guidelines. Key aspects include:
- Capital Adequacy Norms
- KYC & AML Compliance
- Periodic Audits & Reporting
- Fair Practices Code
Recent RBI updates on digital lending have further shaped how fintech companies operate through NBFCs.
Challenges and Risks
- Initial Capital Requirements: Most NBFC categories require a ₹2 crore minimum net owned fund.
- Ongoing Governance: Fintechs must balance innovation with regulatory diligence.
- Risk & Credit Management: Lending always carries default risk—tech can mitigate, but not eliminate it.
The Future of FinTech-NBFC Collaborations
Emerging trends include:
Digital NBFCs are here to stay—and they’re evolving fast, powered by fintech thinking.
Know More: Types of Fintech Companies in India & Their Regulatory Requirements
Conclusion
If you’re starting a fintech company and want to offer loans, add finance options to your app, or help people and businesses who don’t get enough credit, getting an NBFC license could be the smartest step. It gives you the power to lend, grow fast, and stay in control without needing to partner with a bank right away.
Here’s a detailed roadmap on How to Start a Fintech Company in India: A Step-by-Step Guide
For many fintech companies, setting up an NBFC isn’t just about following the rules—it’s actually a smart way to grow. It gives them more control and freedom to build and expand new financial services faster. With an NBFC license, fintechs can design their own lending methods and easily connect technology into their services, helping them move ahead of traditional banks.
Want to explore this path for your venture? Connect with NBFC Advisory to know more and get expert guidance tailored to your fintech goals.
Need expert guidance? Get in touch with our consultants today.
📞 Call NBFC Advisory: +91 93287 18979
🌐 Visit: nbfcadvisory.com
