Platforms across trade finance, invoice discounting, and supply-chain credit are now adjusting to a year where stability is expected to return, but competitive intensity will rise
AI adoption in digital lending can be viewed across three primary application areas. One area is customer engagement, including support, collections, and pre-sales lead qualification
Government-led digitisation initiatives, including platforms such as the Unified Lending Interface, are improving data availability and supporting more efficient underwriting
As India enters 2026, the lending and trade finance ecosystem is still absorbing the aftershocks of a turbulent 2025.
2025 has been marked by volatility in cross-border trade driven by global policy shifts and changing demand patterns. Tariffs have contributed to volatility in export volumes, especially in price-sensitive sectors.
If you look at overall India exports, the US is a significant market. Overall, around 20-25% of exports go to the US. And again, in certain sectors, it’s even more dominant. In sectors such as seafood, the US remains a dominant export market from India. Or if you look at garments or textiles, again, the US is one of the most dominant markets.
As a result, export-heavy businesses continue to navigate uncertainty in demand, pricing, and working capital cycles, while domestic MSMEs are seeing wider credit access as banks re-enter segments they once avoided.
In the broader industry, the shift first visible in 2024 and then strengthening through 2025 continues to play out — banks, having completed the clean-up of their corporate balance sheets and addressed legacy NPAs, have returned to MSME and retail lending with renewed focus.
On one hand, their expansion has increased the flow of capital to NBFCs, as banks seek indirect exposure to these segments and show greater willingness to fund NBFCs operating in these pockets. On the other hand, in categories such as secured lending, banks are emerging as stronger competitors.
As they refine their models and lean into these segments more actively, NBFCs face tighter competition and a need to differentiate their positioning.
The second significant development is the sharp growth of invoice discounting platforms such as TReDS. MSMEs that are part of the supply chains of large companies are seeing improved access to bank financing as a result.
Platforms like TReDS have enabled small-business suppliers to access lower-cost credit by bringing large buyers onto a structured financing system. Large enterprises such as Reliance are now active participants on TReDS, enabling their suppliers to secure funding at lower cost.
This shift is most visible in domestic supply chains, while export-linked MSMEs have yet to experience similar gains.
While the export segment has not seen the same momentum, MSMEs embedded in major domestic supply chains are benefiting from significantly better credit access.
Structural constraints in MSME lending persist, largely because banks remain cautious about unsecured credit and typically require collateral or a longer track record of profitability — criteria that many smaller firms are unable to meet.
However, banks continue to participate conservatively and often prefer indirect exposure through partnerships with NBFCs and fintechs.
At the policy level, incentive programmes designed to encourage MSME lending are mostly accessible only to banks, excluding regulated non-bank lenders that serve the same segment. Expanding eligibility could deepen credit access and support the development of a more diversified and resilient lending ecosystem as the market evolves through 2026 and beyond.
This is partly due to regulatory caution, as authorities evaluate how AI should be applied within critical risk functions. As regulatory clarity emerges, digital lenders are expected to adopt AI-based models more actively within risk management frameworks.
Adoption has been gradual, but regulatory clarity is expected to accelerate adoption. And then the third area is operational optimisation, where workflows can be automated. In the year ahead, AI adoption is expected to broaden across the ecosystem, supported by clearer regulations and maturing capabilities.
Emerging themes such as green financing and climate-aligned supply chain credit are becoming meaningful growth areas. Carbon credits, in particular, represent an expanding opportunity, especially in agriculture where farmers can generate new income streams by monetising these credits.
As such revenue sources mature, they can serve as signals for lenders, enabling financing models that tie credit access to these emerging cash flows.
Parallel to this, the rapid digitisation of MSMEs is reshaping how credit can be delivered. Government-led platforms such as the GeM marketplace are pushing more small businesses to formalise their operations and participate in digital trade.
As more informal MSMEs transition into structured, data-rich environments, lenders gain deeper visibility into transactions and behaviour. This expansion of verifiable data supports new underwriting approaches, allowing risk assessment models to evolve alongside the growing digitisation of commerce.
Banks increasingly partner with digital lenders to deliver specialised products more efficiently than building capabilities internally.
In practice, banks operate on a model where, once they acquire a customer, they aim to serve every requirement — from current and savings accounts to fixed deposits, term loans, and forex handling.
They may choose to collaborate with NBFCs or new-age fintech companies only for products that fall outside their core product suite. Experience shows that when fintechs offer complementary solutions, such as invoice discounting or receivables financing, banks are enthusiastic partners.
These collaborations often operate on revenue-share arrangements, benefiting both sides, with fintechs gaining access to the bank’s distribution network and banks being able to extend specialised products to MSME clients.
Commercial priorities may diverge when fintechs expand into products traditionally offered by banks. For instance, while banks readily partnered on invoice-discounting products, they became hesitant when fintechs experimented with offerings like forex—an area banks already serve for MSMEs.
As many fintechs that began as single-product companies scale and diversify, such overlaps become inevitable. Partnerships work smoothly as long as fintech offerings do not conflict with what banks provide, but once that overlap appears, tensions can surface, shaping how these collaborations evolve in the years ahead.