India stands on the cusp of a tremendous economic leap, with a projected potential to reach a $10 trillion GDP within the next decade. However, for this vision to become a reality, one critical hurdle needs immediate attention: the availability of credit. The infrastructure, energy, telecom, and other core sectors form the backbone of India’s economy, and their growth is directly tied to accessible and robust credit lines, both fund-based and non-fund-based.

While India has made significant strides in recent years, the credit gap remains a bottleneck that restricts the potential of these sectors. The lack of available credit lines slows down project execution, disrupts expansion plans, and hampers the development of new infrastructure. This article examines how this credit crunch is hindering India’s growth and how fintech companies are emerging as vital players in filling this gap.

The Critical Role of Credit in India’s Core Sectors

Infrastructure, energy, and telecom are capital-intensive sectors that demand both short-term and long-term credit to sustain operations and growth. Whether it’s for building new highways, expanding power grids, or establishing 5G networks, these projects require massive financial outlays. Traditionally, banks have been the primary source of credit for such projects. However, they alone cannot meet the growing demand.

The Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) must rethink their strategies and encourage more players in both the fund-based and non-fund-based credit sectors. If India wants to realize its goal of becoming a $10 trillion economy, it needs to empower more businesses to participate in financing core sectors.

Credit Lines: A Double-Edged Sword

India’s current credit landscape faces two significant challenges. First, the unavailability of sufficient credit lines, especially in the infrastructure and energy sectors, creates bottlenecks that halt progress. Second, overly stringent guidelines imposed by regulators often disincentivize businesses from entering these capital-intensive sectors. While regulations are crucial for maintaining financial stability, a balance is required to encourage growth.

To meet the demands of the infrastructure, energy, and telecom sectors, India requires both fund-based and non-fund-based credit solutions. Fintech companies are playing a pivotal role here, especially as banks alone are insufficient to bridge this gap. According to estimates, there is a non-fund-based credit gap of approximately INR 120 lakh crore over the next 3-5 years, and banks will only be able to fulfil 40-50% of this requirement.

The Need for Fintech in India’s Credit Ecosystem

As traditional financial institutions struggle to keep up with the demand, fintech companies are stepping in to fill the void. Both fund-based and non-fund-based fintech companies are emerging as key players, providing businesses with the credit solutions they need to grow and thrive.

B2B Fund-Based Credit Fintechs

The fund-based credit fintech segment in India has seen some notable players making significant strides. Companies like Oxyzo, Yubi, Perfios, EnKash, and Kredmint are at the forefront of providing credit solutions to businesses. These companies offer everything from working capital loans to supply chain financing, helping businesses maintain liquidity and fund their growth.

1. Oxyzo: Known for its supply chain financing solutions, Oxyzo helps businesses maintain liquidity without relying solely on traditional banking channels.

2. Yubi: Offering a wide range of credit solutions, Yubi has become a go-to platform for businesses seeking financing beyond the traditional banking sector.

3. Perfios: Specializing in credit underwriting and data analytics, Perfios helps businesses secure loans with greater ease and less paperwork.

4. EnKash: Focused on corporate cards and expense management, EnKash provides businesses with fund-based credit lines for their operational needs.

5. Kredmint: Offering flexible working capital loans, Kredmint empowers businesses to finance their short-term needs efficiently.

These companies are making it easier for businesses to access the credit they need, allowing them to focus on growth rather than being held back by financial constraints.

B2B Non-Fund Based Credit Fintechs: A Game-Changer

While the fund-based credit segment is gaining traction, the non-fund-based credit market remains largely underdeveloped. In this space, Surety Seven stands out as a pioneer. It is currently India’s only notable fintech offering non-fund-based credit solutions. This gap represents a huge opportunity, as non-fund-based credit, particularly in the form of Surety Bonds, is crucial for the growth of capital-intensive sectors.

Surety Bonds, offered by Surety Seven, provide a guarantee that a business will fulfil its obligations, allowing companies to take on more projects without locking up their working capital. This solution is particularly relevant in infrastructure and energy, where the demand for performance and payment guarantees is high. Surety Seven’s innovative approach has the potential to change the landscape of India’s core sectors by freeing up capital that would otherwise be tied up in bank guarantees.

The non-fund-based credit gap in India is projected to be INR 120 lakh crore in the next few years, and Surety Seven is uniquely positioned to address this. However, India needs at least 100 more players in this space to meet the growing demand. Encouraging the growth of companies like Surety Seven is crucial to closing this gap and ensuring that India’s infrastructure, energy, and telecom sectors have the support they need to thrive.

Why Banks Are No Longer Enough?

For decades, banks have been the backbone of India’s credit ecosystem. However, as the economy grows and the demand for credit increases, banks alone cannot meet the needs of businesses in core sectors. This is especially true in the case of non-fund-based credit, where traditional banks are reluctant to issue guarantees without demanding large amounts of collateral.

Banks are facing their own set of challenges, including stricter regulatory requirements and rising non-performing assets (NPAs). These factors limit their ability to extend large amounts of credit to sectors like infrastructure, energy, and telecom. As a result, businesses are left with fewer options to secure the credit they need to grow. This is where fintech companies, particularly those offering non-fund-based credit solutions, can make a real difference.

The Role of Regulation: Striking the Right Balance

Regulation plays a critical role in ensuring the stability of India’s financial system. However, overly stringent guidelines can stifle innovation and prevent businesses from accessing the credit they need. The RBI has taken steps to support fintech companies in the fund-based credit sector, but more needs to be done.

The Insurance Regulatory and Development Authority of India (IRDAI) must follow the RBI’s lead and create an enabling environment for fintech companies offering non-fund-based credit solutions. Companies like Surety Seven need the freedom to innovate and grow without being bogged down by excessive regulatory burdens. A balanced approach that ensures financial stability while fostering innovation is essential for India’s economic growth.

Chartered Accountants: Catalysts in Credit Distribution

Chartered Accountants (CAs) can play a pivotal role in the distribution of credit products, especially those offered by fintech companies. As trusted advisors to businesses, CAs are uniquely positioned to help their clients navigate the complexities of fund-based and non-fund-based credit solutions. They can help businesses understand the benefits of products like Surety Bonds, guiding them through the application process and ensuring that they secure the credit they need to grow.

According to an article from Surety Seven, CAs can become valuable partners in the distribution of Surety Bonds and other non-fund-based credit solutions. By leveraging their expertise, CAs can help businesses unlock new growth opportunities while contributing to the overall development of India’s core sectors.

Closing the Credit Gap: The Way Forward with Surety

India’s credit gap is a significant obstacle to the country’s economic growth. Without sufficient credit lines, businesses in core sectors like infrastructure, energy, and telecom cannot grow, and the country’s development will stall. Fintech companies, both in the fund-based and non-fund-based credit sectors, are essential to closing this gap.

However, more players are needed. India requires at least 100 more fintech companies in both the fund-based and non-fund-based credit sectors to meet the growing demand. The non-fund-based credit gap is particularly pressing, and companies like Surety Seven are leading the charge in providing innovative solutions that can help businesses grow without tying up their capital.

The government, through the RBI and IRDAI, must create an enabling environment for these fintech companies to thrive. This includes easing regulations, providing incentives for innovation, and ensuring that businesses have access to the credit they need to grow.

India’s goal of becoming a $10 trillion economy is within reach, but only if the country addresses its credit bottleneck. By supporting the growth of fintech companies and closing the credit gap, India can unlock the full potential of its core sectors and pave the way for a brighter, more prosperous future.

Conclusion: A Call to Action

The unavailability of credit lines, both fund-based and non-fund-based, remains a bottleneck in India’s growth story. While the fintech sector has made significant strides in providing fund-based credit solutions, the non-fund-based credit market remains largely untapped. Companies like Surety Seven are pioneering this space, offering innovative solutions that can transform India’s core sectors. However, the journey is far from over. India needs a robust, fintech-driven ecosystem that can provide the credit lines necessary to fuel its growth. With the right regulatory support and more players in the market, India can bridge the credit gap and achieve its goal of becoming a $10 trillion economy.