FIDC, along with several NBFCs, recently held a pre-Budget meeting with senior officials, reiterating long-standing demands that the industry believes are critical for its next phase of growth.
Dedicated Refinance Window
Raman Aggarwal, CEO of FIDC, said the most important request remains the creation of a dedicated refinance window, calling it the sector’s top requirement.
Aggarwal highlighted that NBFCs today play a major role in lending to MSMEs, electric vehicles, solar rooftops and other green assets. The Finance Minister had earlier noted that NBFCs now account for 25% of total bank credit, with a target to reach 50% by 2047.
Despite their growing importance, NBFCs still face limited and expensive funding options. “Sources of funding are very restricted,” Aggarwal said, pointing out that mid- and small-sized NBFCs primarily depend on banks or borrow from larger NBFCs at higher costs.
He emphasised that a dedicated refinance window—similar to what the National Housing Bank provides to housing finance companies—is essential to diversify funding and reduce borrowing costs. “There is a strong case for making funding available to NBFCs,” he said.
Lowering SARFAESI Recovery Threshold
Currently, NBFCs can invoke SARFAESI only for loans above ₹20 lakh. Since most NBFC retail loans fall below that threshold, they cannot use the law for direct recovery.
Aggarwal said reducing the limit to ₹1 lakh, as applicable for banks, would help NBFCs adopt more effective recovery mechanisms and reduce cheque-bounce and other indirect cases clogging the courts.
Removal of TDS on Interest Income
NBFCs continue to face TDS deductions from borrowers, unlike several other financial institutions. This creates major operational challenges.
Aggarwal shared that ten large NBFCs together had 3.3 lakh borrowers deducting TDS as of March 31, 2025. He said this increases compliance burdens for small borrowers and does not generate any additional revenue for the government.
Allow Section 80E Deduction on Education Loan
Interest on education loans from banks qualifies for deduction under Section 80E, but NBFCs require separate notification. So far, only one NBFC has been notified.
Aggarwal said extending this benefit is necessary to ensure a level playing field.
When asked about the Finance Ministry’s reaction, Aggarwal said officials offered a “patient hearing” but did not provide any commitments. “We will get to know whenever the Budget comes,” he added.
Responding to reports of a ₹20,000 crore credit guarantee scheme for NBFC-MFIs, Aggarwal clarified that FIDC does not represent this category, which is overseen by Sa-Dhan and MFIN. Therefore, he said he could not comment on the proposal
