Most of India’s micro, small, and medium enterprises still have no formal credit. Deloitte’s State of Financial Services in India report puts formal access at 14%, which leaves a credit gap of roughly Rs 25 lakh crore as of March 2025. The arithmetic is the problem. The effort needed to assess a small borrower is similar to the effort needed for a large one, but the loan is a fraction of the size, which means the cost has to be borne out of a significantly smaller interest income. For a lender to serve these businesses profitably, four factors come into play: the cost of handling each account, losses from defaults, the cost of the money it lends, and the capital it must hold against those losses.
Origination
Lenders incur costs and expend considerable effort before a loan is disbursed, and the effort does not shrink with the ticket size. Sales staff make repeated calls to follow up on leads, collect paper files, chase missing details, and wait for signed forms. That time is hard to justify when the loan is small. Technology can change this by shifting much of the work into the first contact itself. Vayana’s suite of Credit Intelligence Solutions can bring trade and invoice records into the application from the start, so the lender assesses current activity instead of a stale statement.
Processing
Paperwork accounts for a large share of the cost of a loan. Signatures are chased across several visits, identity documents are checked manually, figures are re-entered repeatedly, and incomplete files are sent back for correction. Each delay lengthens the turnaround on a small loan, and each error sends the file back to the start. Technology is now able to take on much of this load. Automated document capture and verification shorten the checking cycle, and Vayana’s Trade Compliance Solutions can capture trade documents once in structured form, so the figures do not have to be re-keyed at every step.
Underwriting
Underwriting decides who receives credit and on what terms, and it has long depended on information that is thin for small businesses. Traditional lenders look to bureau records, audited accounts, property collateral, and banking history, and a firm that has recently started business operations may have little of any of them. That leaves the lender to decline it or price it as an unknown risk. A BCG study on digital MSME lending found that more than 75% of surveyed MSMEs were comfortable sharing data digitally, which suggests that usable information exists if lenders can reach it. Interest income must cover funding costs, operating expenses, expected losses, and a return on capital, so every loan is only as profitable as the risk judgment behind it. Credit losses are the other side of that arithmetic. AI-based credit risk assessment has made it possible to account for this arithmetic while extending loans. In fact, NBFC credit costs fell from around 6.3% in September 2021 to 4.4% in September 2025, which can be attributed in part to the use of these models.
Rubix’s credit decisioning platforms combine structured records with alternative data, including social media signals, to produce risk scores for counterparties with little public information behind them. Lenders that tie losses to specific borrower signals are better placed to hold that gain as conditions tighten, as alternative data widens what a lender can see.
Servicing and early warning
Once a loan is disbursed, monitoring usually stays light until something changes and a payment is missed. Consider a distributor whose receipts from its largest buyer begin to slow. It may not default at all, but a lender that tracks repayment patterns closely sees the slowdown while it still has room to act. Seeing that slowdown early gives the lender time to respond. Rubix’s risk monitoring flags early signs of deterioration among borrowers, customers, distributors, and dealers, so a lender can review limits, shorten tenors, tighten covenants, or cap exposure to a single buyer before late payment becomes a default.
Collections
How well a lender manages collections determines how much of a loss is contained and how much compounds. Many teams spend their days on accounts that need only a reminder, even as the difficult cases wait in the same queue. Repeated delays within one segment also suggest that the way those loans were originated deserves a second look, although the delays alone do not show that the original approval was wrong. Vayana solves for this through CollectrIQ, its AI-native collections product, which sorts accounts by what needs attention and supports follow-up at volume. The collections team can then focus on the cases where its judgment is crucial.
Funding
How a lender raises its funds sets the terms on which it can lend them out. Funders price a lender by reading its numbers, and a newer or smaller lender has a short record for them to read. The RBI’s June 2026 Financial Stability Report describes NBFCs as financially sound, with strong capitalisation, healthy profitability, and improving asset quality, which are the measures funders examine. NBFCs are relying less on banks. Their bank borrowings fell from 41.2% of their total borrowings in September 2024 to 32.3% a year later, which pushes them toward other sources of funding. However, an RBI report from late 2024 noted that reliance on non-bank sources had raised NBFCs’ cost of funds.
Technology improves visibility for the funder. Loan-level records of origination, repayment, early-warning signals, and recoveries let a funder examine how specific cohorts of borrowers have behaved across months or years, which the lender’s aggregate balance sheet cannot reflect. That granularity lets institutional investors and co-lending partners price a specific pool of loans instead of the whole company. Funders extend better terms only when the records show performance that holds up across credit cycles.
Conclusion
A lender that handles accounts cheaply, judges risk accurately, recovers what it is owed, and manages its funding well keeps more of its interest income. That margin lets it lend to borrowers it could not previously afford to assess. Technology asks for investment up front, in platforms, data, people, and process change. Its benefits arrive in stages: operating costs first, then credit losses, then collections performance, and finally the cost of funds, once funders have seen results hold through a downturn. Lenders that keep investing on technology through the lean years will capture that final gain, while those that stop early will have paid for the technology without collecting the benefit.
