{"id":12203,"date":"2026-04-22T17:30:54","date_gmt":"2026-04-22T17:30:54","guid":{"rendered":"https:\/\/srv1603485.hstgr.cloud\/fintechs-vs-nbfcs-who-wins-the-lending-race\/"},"modified":"2026-09-21T13:28:53","modified_gmt":"2026-09-21T13:28:53","slug":"fintechs-vs-nbfcs-who-wins-the-lending-race","status":"publish","type":"post","link":"https:\/\/www.billcut.com\/blogs\/fintechs-vs-nbfcs-who-wins-the-lending-race\/","title":{"rendered":"Fintechs vs NBFCs: Who Wins the Lending Race?"},"content":{"rendered":"

By BillCut<\/strong>
Last updated: September 2026<\/p>\n

NBFC finance is credit from a non banking financial company, a lender registered with the Reserve Bank of India that can lend but cannot take demand deposits. Most app based loans in India are NBFC loans with a technology company in front. Which one is which decides who owes you disclosures and who answers your complaint.<\/p>\n

So the race framing is the wrong question for a borrower. The two sides are not fighting over you. They are usually working on the same loan, and the rules now say exactly who is responsible for what.<\/p>\n

What Is NBFC Finance, and How Is It Different From a Bank Loan?<\/h2>\n

An NBFC is a company registered under the Companies Act that lends, leases, or deals in shares, bonds and similar securities. The Reserve Bank of India explains in its published guidance on non banking financial companies<\/a> that an NBFC cannot accept demand deposits, is not part of the payment and settlement system, and cannot issue cheques drawn on itself. Deposit insurance from the Deposit Insurance and Credit Guarantee Corporation is not available to depositors of deposit taking NBFCs.<\/p>\n

Read that list again and notice what is missing from it. Nothing there limits an NBFC\u2019s ability to lend to you. The restrictions are on the deposit side, which is why NBFC finance behaves like a bank loan from the borrower\u2019s chair and is regulated with the same seriousness.<\/p>\n

The practical differences show up in reach and speed rather than in legitimacy. NBFCs have historically served borrowers whose income is real but hard to document, in places where a branch network never made commercial sense. Gold loans, two wheeler loans, small business loans against receivables and loans to first time borrowers sit disproportionately with NBFCs because that is the underwriting they built.<\/p>\n

The trade off is honest and worth stating. NBFCs raise money from banks and capital markets rather than from cheap current and savings accounts, so their cost of funds is usually higher than a large bank\u2019s, and that can show up in the rate you are quoted. You are often paying something for access and speed.<\/p>\n

How Do Banks, NBFCs and Lending Apps Compare?<\/h3>\n\n\n\n\n\n\n\n\n\n
What you care about<\/th>\nBank<\/th>\nNBFC<\/th>\nLending app on its own<\/th>\n<\/tr>\n
Who holds the loan<\/td>\nThe bank<\/td>\nThe NBFC<\/td>\nNeither, unless the app is itself a regulated lender<\/td>\n<\/tr>\n
Can it lend to you<\/td>\nYes<\/td>\nYes<\/td>\nOnly through a regulated lender<\/td>\n<\/tr>\n
Can it take your deposits<\/td>\nYes<\/td>\nNo demand deposits<\/td>\nNo<\/td>\n<\/tr>\n
Who must give you the Key Fact Statement<\/td>\nThe bank<\/td>\nThe NBFC<\/td>\nThe regulated lender behind it<\/td>\n<\/tr>\n
Who answers your complaint<\/td>\nThe bank<\/td>\nThe NBFC<\/td>\nThe regulated lender, not the app<\/td>\n<\/tr>\n
Typical strength<\/td>\nLowest cost of funds<\/td>\nReach and underwriting for thin file borrowers<\/td>\nSpeed and interface<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The right column is the one most borrowers get wrong. An app is not automatically a lender, and if you are checking whether the one on your phone is legitimate, the method is set out in this guide to checking a loan app against the Reserve Bank of India list<\/a>.<\/p>\n

Who Actually Lends the Money Behind a Loan App?<\/h2>\n

In a digital loan there are two roles and they are defined in regulation. The regulated entity is the bank, cooperative bank, NBFC or all India financial institution whose balance sheet the loan sits on. The lending service provider is an agent of that regulated entity that performs some of its digital lending functions, such as onboarding, servicing or collections.<\/p>\n

Under the Reserve Bank of India Digital Lending Directions, 2025, issued on 8 May 2025<\/a>, where a lending service provider has arrangements with several regulated entities, the digital view of loan offers must include the names of the regulated entities making each offer, along with the amount, tenor and annual percentage rate, so that offers can be compared fairly. Responsibility for grievance redressal continues to rest with the regulated entity, even though both it and the customer facing lending service provider must name nodal grievance officers.<\/p>\n

That is the sentence that settles the who wins question. The technology company can own the screen, the pricing comparison and the collections call. It cannot own the obligation. When something goes wrong, the NBFC or bank whose name appears on the offer is the party the regulator holds responsible.<\/p>\n

For you this turns into one habit. Before accepting any offer inside an app, find the name of the lender. It has to be there, and the same applies to newer routes such as a credit line on the Unified Payments Interface<\/a>, where the interface and the lender are separate parties.<\/p>\n

How Do Fintechs and NBFCs Work Together Under Co-Lending?<\/h2>\n

Co-lending is an arrangement where two regulated lenders fund the same loan and split it between their books. The Reserve Bank of India Co-Lending Arrangements Directions, 2025, issued on 6 August 2025<\/a> set the terms, and they take effect from 1 January 2026, or earlier if a lender chooses.<\/p>\n

The directions are unusually borrower friendly, and they are worth knowing because they close most of the gaps that made co-lending confusing.<\/p>\n\n\n\n\n\n\n\n\n\n
What the directions require<\/th>\nWhat it means for you<\/th>\n<\/tr>\n
Each lender keeps at least 10 per cent of the individual loan on its own books<\/td>\nNeither partner can originate a loan and walk away from all of the risk<\/td>\n<\/tr>\n
The loan agreement names a single point of interface with the customer<\/td>\nYou have one party to deal with, and you must be told before that changes<\/td>\n<\/tr>\n
Roles, responsibilities, customer protection and grievance redressal are disclosed upfront<\/td>\nYou know who does what before you sign, not after a dispute starts<\/td>\n<\/tr>\n
The rate you pay is a blended rate, weighted by each lender\u2019s funding share<\/td>\nOne rate, not two, and it is arithmetic rather than negotiation<\/td>\n<\/tr>\n
Disbursements and repayments route through an escrow account at a bank<\/td>\nYour repayment is traceable and does not sit in an intermediary\u2019s account<\/td>\n<\/tr>\n
Any default loss guarantee from the originating lender is capped at 5 per cent of loans outstanding<\/td>\nRisk cannot be shifted wholesale onto the partner that did not underwrite it<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Set against that framework, the competition story looks thin. A fintech brings distribution and decisioning speed. An NBFC brings capital, underwriting history and the licence that makes the loan a loan. The rules now require them to tell you how they have divided the work.<\/p>\n

What Does NBFC Finance Actually Cost?<\/h2>\n

The quoted rate is not the cost. The cost is the annual percentage rate, which folds the processing fee and other charges into the rate, and every regulated lender has to show it to you in a Key Fact Statement before you sign.<\/p>\n

The figures below are illustrative. Assume a personal loan of Rs 2,00,000 for 24 months at 16 per cent a year on a reducing balance, with a processing fee of 2 per cent, which is Rs 4,000 deducted upfront.<\/p>\n\n\n\n\n\n\n\n\n\n
Line<\/th>\nAmount<\/th>\n<\/tr>\n
Loan amount<\/td>\nRs 2,00,000<\/td>\n<\/tr>\n
Monthly EMI over 24 months<\/td>\nRs 9,793<\/td>\n<\/tr>\n
Interest paid over the full term<\/td>\nRs 35,023<\/td>\n<\/tr>\n
Processing fee<\/td>\nRs 4,000<\/td>\n<\/tr>\n
Total cost of the loan<\/td>\nRs 39,023<\/td>\n<\/tr>\n
Effective annual percentage rate including the fee<\/td>\nAbout 18.1 per cent<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

The headline said 16 per cent. Once the Rs 4,000 fee is taken out of what actually reached your account, the true rate is about 18.1 per cent a year. A fee of 2 per cent moved the rate by roughly two percentage points because it is charged once but the loan runs for only two years.<\/p>\n

Now put the same Rs 2,00,000 on a credit card revolving at an illustrative 3.5 per cent a month. Paying that identical Rs 9,793 every month, the card takes 37 months to clear instead of 24, and after 24 payments there is still about Rs 97,604 outstanding. Same monthly outgo, thirteen extra months, because the rate is more than double.<\/p>\n

That gap is the whole argument for structured borrowing over revolving borrowing, and it holds whether the structured loan comes from a bank or from an NBFC.<\/p>\n

If a card balance is what you are carrying right now, the comparison above is the one worth running against your own numbers. BillCut is a debt refinancing platform and therefore has a commercial interest in this category, and it works by converting high interest card balances into a structured loan with a fixed EMI. You can see how BillCut approaches credit card balances<\/a> before deciding whether that route fits.<\/p>\n

What Protections Do You Get When an NBFC Lends to You?<\/h2>\n

More than most borrowers realise, and they apply whether the loan reached you through a branch or through an app.<\/p>\n

You are entitled to a Key Fact Statement showing the annual percentage rate before you commit. You also get an explicit option to exit a digital loan during an initial cooling off period by repaying the principal and the proportionate annual percentage rate without any penalty, and that period is set by the lender\u2019s board at a minimum of one day.<\/p>\n

Your repayment record is not a private matter between you and the lender either. Under the Reserve Bank of India Credit Information Reporting Directions, 2025, dated 6 January 2025<\/a>, credit institutions and credit information companies must update credit information on a fortnightly basis, on the fifteenth and the last day of each month. You are entitled to one free full credit report including your credit score once in each calendar year, and to compensation of Rs 100 per calendar day where a complaint is not resolved within thirty calendar days of filing.<\/p>\n

If the lender does not resolve a complaint, the escalation route is the Reserve Bank Integrated Ombudsman Scheme, introduced on 12 November 2021<\/a>, which covers non banking financial companies as well as banks. Complaints go through the portal at cms.rbi.org.in, and the Reserve Bank of India runs a contact centre on 14448 for guidance.<\/p>\n

The limit on all of this is worth saying plainly. These rules govern disclosure, conduct and redressal. None of them caps the interest rate you are charged, and none of them makes a loan affordable that was not affordable to begin with.<\/p>\n

How Do You Check That an NBFC Is Genuine?<\/h2>\n

Three checks, in order, and all of them are free.<\/p>\n

    \n
  1. Look the lender up on the Reserve Bank of India list of registered non banking financial companies<\/a>. The same page publishes a separate list of entities whose certificate of registration has been cancelled, which is the list people forget to read.<\/li>\n
  2. Check the name against the offer inside the app. The lender named on the loan offer should be the entity you just looked up. If the app will not name a lender, that is the answer.<\/li>\n
  3. Use the Reserve Bank of India Sachet portal<\/a> to see the lists of entities registered with different regulators, to file a complaint and to track it.<\/li>\n<\/ol>\n

    A registered NBFC displays its certificate of registration at its place of business, so a physical lender that cannot show you one is telling you something. None of this is a judgment on the quality of the loan. Registration confirms the lender exists lawfully. It does not tell you the rate is reasonable, and the same caution applies to newer channels such as peer to peer lending platforms<\/a>, where registration and risk are separate questions.<\/p>\n

    Who Should Choose NBFC Finance, and Who Should Not?<\/h2>\n

    NBFC finance suits you if a bank has declined you or will not move quickly enough. That covers a lot of people. Self employed income, a short credit history, a small business that invoices rather than draws a salary, an asset to pledge and a need that will not wait for a branch appointment.<\/p>\n

    It also suits you when the product itself is an NBFC speciality. Gold loans, two wheeler and used vehicle loans, loans against property for small businesses and consumer durable finance are areas where NBFCs have the deeper underwriting and the faster process.<\/p>\n

    It suits you less well in two situations. If you qualify comfortably at a large bank and are not in a hurry, the lower cost of funds usually wins, and there is no prize for paying more for the same money. And if the loan is being offered to you inside an app at a moment when you are already stretched, speed is working against you rather than for you, which is the pattern behind much of the scrutiny of buy now pay later portfolios<\/a>.<\/p>\n

    The test is not the category of the lender. It is whether the annual percentage rate on the Key Fact Statement is one you can carry for the full tenor.<\/p>\n

    <\/p>\n

    Frequently Asked Questions<\/h2>\n

    What is NBFC finance in simple terms?<\/h3>\n

    NBFC finance is lending by a non banking financial company, a company registered under the Companies Act and regulated by the Reserve Bank of India that provides loans and advances and deals in securities. It can lend to you, but it cannot accept demand deposits or issue cheques drawn on itself.<\/p>\n

    Is an NBFC loan safe compared with a bank loan?<\/h3>\n

    From a borrower\u2019s point of view the protections are broadly the same, because disclosure, cooling off, credit reporting and Ombudsman rules apply to non banking financial companies as well as banks. The difference that matters is the rate and the fees on your Key Fact Statement, not the category of the lender.<\/p>\n

    Do fintech apps lend money themselves?<\/h3>\n

    Usually not. Most are lending service providers acting as agents of a regulated entity, which is the bank or non banking financial company whose balance sheet carries the loan. Where a lending service provider works with several lenders, the loan offer shown to you must name the regulated entity extending it.<\/p>\n

    Who do I complain to if a loan app mistreats me?<\/h3>\n

    Responsibility for grievance redressal rests with the regulated entity, meaning the bank or non banking financial company that made the loan, even when the app is the only thing you have dealt with. Both the lender and the customer facing app must have named nodal grievance redressal officers.<\/p>\n

    What is co-lending, and does it change what I pay?<\/h3>\n

    Co-lending is two regulated lenders funding the same loan and splitting it between their books. You pay a single blended rate derived from each lender\u2019s rate weighted by its funding share, and the loan agreement must name one point of contact for you.<\/p>\n

    Why is the interest rate on my NBFC loan higher than a bank\u2019s?<\/h3>\n

    Non banking financial companies cannot take demand deposits, so they raise money from banks and capital markets rather than from low cost savings accounts. That higher cost of funds, together with lending to borrowers whose income is harder to document, usually shows up in the rate.<\/p>\n

    How do I know whether an NBFC is registered with the Reserve Bank of India?<\/h3>\n

    Check the list of registered non banking financial companies published on the Reserve Bank of India website, and check the companion list of entities whose certificate of registration has been cancelled. The Sachet portal also publishes lists of entities registered with different regulators and lets you file and track a complaint.<\/p>\n

    Does a loan from an NBFC appear on my credit report?<\/h3>\n

    Yes. Credit institutions and credit information companies must keep credit information updated on a fortnightly basis, on the fifteenth and the last day of each month, so an NBFC loan is reported like any other borrowing.<\/p>\n

    Can I cancel a digital loan after taking it?<\/h3>\n

    You must be given an explicit option to exit a digital loan during an initial cooling off period by repaying the principal and the proportionate annual percentage rate without any penalty. The length of that period is set by the lender\u2019s board and is at least one day.<\/p>\n

    Are NBFC fixed deposits covered by deposit insurance?<\/h3>\n

    No. Deposit insurance from the Deposit Insurance and Credit Guarantee Corporation is not available to depositors of deposit taking non banking financial companies, which is a different position from a bank deposit.<\/p>\n

    <\/p>\n

    This article is for information only. It is not financial, investment or tax advice, and it does not recommend any lender or borrowing decision. Rates, fees and rules change, so check the Key Fact Statement for any loan you are offered and consult a qualified professional before acting on anything here.<\/em><\/p>\n\n

    \n
      \n
    1. \n

      What is NBFC finance in simple terms?<\/h3>\n
      \n\n

      NBFC finance is lending by a non banking financial company, a company registered under the Companies Act and regulated by the Reserve Bank of India that provides loans and advances and deals in securities. It can lend to you, but it cannot accept demand deposits or issue cheques drawn on itself.<\/p>\n\n<\/div>\n<\/li>\n

    2. \n

      Is an NBFC loan safe compared with a bank loan?<\/h3>\n
      \n\n

      From a borrower\u2019s point of view the protections are broadly the same, because disclosure, cooling off, credit reporting and Ombudsman rules apply to non banking financial companies as well as banks. The difference that matters is the rate and the fees on your Key Fact Statement, not the category of the lender.<\/p>\n\n<\/div>\n<\/li>\n

    3. \n

      Do fintech apps lend money themselves?<\/h3>\n
      \n\n

      Usually not. Most are lending service providers acting as agents of a regulated entity, which is the bank or non banking financial company whose balance sheet carries the loan. Where a lending service provider works with several lenders, the loan offer shown to you must name the regulated entity extending it.<\/p>\n\n<\/div>\n<\/li>\n

    4. \n

      Who do I complain to if a loan app mistreats me?<\/h3>\n
      \n\n

      Responsibility for grievance redressal rests with the regulated entity, meaning the bank or non banking financial company that made the loan, even when the app is the only thing you have dealt with. Both the lender and the customer facing app must have named nodal grievance redressal officers.<\/p>\n\n<\/div>\n<\/li>\n

    5. \n

      What is co-lending, and does it change what I pay?<\/h3>\n
      \n\n

      Co-lending is two regulated lenders funding the same loan and splitting it between their books. You pay a single blended rate derived from each lender\u2019s rate weighted by its funding share, and the loan agreement must name one point of contact for you.<\/p>\n\n<\/div>\n<\/li>\n

    6. \n

      Why is the interest rate on my NBFC loan higher than a bank\u2019s?<\/h3>\n
      \n\n

      Non banking financial companies cannot take demand deposits, so they raise money from banks and capital markets rather than from low cost savings accounts. That higher cost of funds, together with lending to borrowers whose income is harder to document, usually shows up in the rate.<\/p>\n\n<\/div>\n<\/li>\n

    7. \n

      How do I know whether an NBFC is registered with the Reserve Bank of India?<\/h3>\n
      \n\n

      Check the list of registered non banking financial companies published on the Reserve Bank of India website, and check the companion list of entities whose certificate of registration has been cancelled. The Sachet portal also publishes lists of entities registered with different regulators and lets you file and track a complaint.<\/p>\n\n<\/div>\n<\/li>\n

    8. \n

      Does a loan from an NBFC appear on my credit report?<\/h3>\n
      \n\n

      Yes. Credit institutions and credit information companies must keep credit information updated on a fortnightly basis, on the fifteenth and the last day of each month, so an NBFC loan is reported like any other borrowing.<\/p>\n\n<\/div>\n<\/li>\n

    9. \n

      Can I cancel a digital loan after taking it?<\/h3>\n
      \n\n

      You must be given an explicit option to exit a digital loan during an initial cooling off period by repaying the principal and the proportionate annual percentage rate without any penalty. The length of that period is set by the lender\u2019s board and is at least one day.<\/p>\n\n<\/div>\n<\/li>\n

    10. \n

      Are NBFC fixed deposits covered by deposit insurance?<\/h3>\n
      \n\n

      No. Deposit insurance from the Deposit Insurance and Credit Guarantee Corporation is not available to depositors of deposit taking non banking financial companies, which is a different position from a bank deposit.<\/p>\n\n<\/div>\n<\/li>\n<\/ol>\n<\/div>","protected":false},"excerpt":{"rendered":"

      Fintechs bring speed and innovation, NBFCs bring trust and reach \u2014 together they\u2019re redefining India\u2019s lending race.<\/p>\n","protected":false},"author":2,"featured_media":1010,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","rank_math_title":"NBFC Finance vs Fintech Lending: Who Actually Lends to You","rank_math_description":"NBFC finance means the lender, not the app, carries your loan. What India's 2025 co-lending rules changed, and what a 16 per cent loan actually costs you.","rank_math_focus_keyword":"nbfc finance","rank_math_primary_category":0},"categories":[425],"tags":[438],"class_list":["post-12203","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-digital-lending-financial-inclusion","tag-fintech-and-nbfc-lending-competition-illustration"],"_links":{"self":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts\/12203","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/comments?post=12203"}],"version-history":[{"count":4,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts\/12203\/revisions"}],"predecessor-version":[{"id":15718,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/posts\/12203\/revisions\/15718"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/media\/1010"}],"wp:attachment":[{"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/media?parent=12203"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/categories?post=12203"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.billcut.com\/blogs\/wp-json\/wp\/v2\/tags?post=12203"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}