NBFCs now contribute 18%+ of India’s total credit supply, making them a central engine of credit distribution. Their reach into underserved segments makes them critical for:

• MSME & SME lending
• consumer finance
• vehicle loans
• gold lending
• microfinance
• supply-chain credit

Between 2015 and 2024, NBFC assets grew at nearly 17% CAGR, consistently outperforming many banking segments. This scale, paired with regulatory tightening, has triggered a structural push toward consolidation.

Three major forces are reshaping the NBFC ecosystem:

A. RBI’s Scale-Based Regulation (SBR) Framework

NBFCs are categorised into:

• Base Layer
• Middle Layer
• Upper Layer
• Top Layer

Each layer faces progressively tougher expectations on:

• NOF
• governance
• NPA recognition
• risk management
• regulatory reporting

A major turning point was the increase in minimum NOF requirement to ₹10 crore, forcing several smaller NBFCs to:

• infuse significant capital, or
• seek mergers or buyouts

This regulatory design intentionally pushes the sector toward stronger, well-capitalised institutions.

B. Technology and Digital-First Compliance

RBI’s digital lending rules require:

• direct disbursal mechanisms
• secured onboarding
• KYC controls
• LSP reporting
• board-approved IT systems
• cybersecurity frameworks

Technology expenses have jumped 30–45% in three years, making standalone compliance increasingly difficult for small NBFCs. Many promoters prefer merging with tech-driven NBFCs or fintech acquirers.

C. High Capital Requirement for Growth

With loan books crossing ₹33 lakh crore, NBFCs need continuous capital infusion to expand 20–30% annually. Investors prefer acquiring existing NBFCs rather than applying for a fresh licence—making NBFCs attractive strategic assets.

Current active buyers include:

• large domestic NBFCs
• fintech companies
• private equity funds
• overseas investors
• NBFC aggregators
• family offices
• corporate groups

Their primary motivation: India’s low Credit-to-GDP ratio (56%) compared with

• USA – 280%
• China – 180%
• UK – 160%

This signals massive future lending upside.

Investors evaluate:

• NOF (preferably ₹10–40 crore)
• GNPA ratios (<2–3%)
• litigation or SARFAESI issues
• compliance history
• RBI inspection status
• governance quality
• technology readiness

Even a loss-making NBFC can command premium valuation provided the licence is clean.

NBFC valuations in India vary widely depending on financial health, growth potential, regulatory cleanliness, and technology readiness. Typical benchmark ranges are:

Clean NBFC with a stable loan book

These entities generally command valuations of 1.2× to 2.5× their Net Worth, provided their asset quality and compliance history are strong.

High-growth NBFCs

Fast-scaling NBFCs with strong disbursement traction and quality underwriting often achieve 2.5× to 4× their Net Worth.

Fintech-acquired NBFCs

Fintechs actively seek NBFCs with digital readiness or clean licences, often paying a premium in the range of 4× to 6× Net Worth due to strategic value.

Loss-making NBFCs but with a clean RBI licence

Even if loss-making, an NBFC with a clean regulatory record can still fetch ₹8 crore to ₹15 crore, valued purely for the licence itself.

Trends expected between 2025 and 2035:

• emergence of aggregator NBFC platforms
• dominance of technology-powered NBFCs
• rapid NBFC-fintech partnerships
• co-lending models scaling nationally
• Upper-layer NBFCs converting into banks

NBFC consolidation will mirror banking consolidation of the 1990s.

NBFCs are now central to India’s credit economy and financial inclusion. But the standalone NBFC model is becoming unsustainable. Going forward, only those NBFCs that invest in:

• governance,
• capitalisation,
• technology,
• compliance,
• and scale

will survive and expand.

Consolidation is not optional—it is the inevitable evolution of the NBFC landscape.

VFSL specialised NBFC advisory and transaction execution, including:

• Mergers, acquisitions & buyouts
• Due diligence (financial, regulatory, operational)
• Valuation advisory
• Licence-based acquisition structuring
• RBI compliance documentation
• Investor identification & deal negotiations
• NBFC–fintech transaction strategy

We combine capital markets capability, regulatory advisory, and cross-border investment expertise to deliver end-to-end NBFC transaction execution—fully aligned with RBI norms and investor expectations.