Bridging Credit Gap Isn't Just An Opportunity But A Responsibility: Godrej Capital's CBO

Bridging the credit gap in Indian micro, small and medium enterprises (MSMEs) face is not just an opportunity but it is a responsibility, said Pankaj Gupta, Chief Business Officer (CBO), Godrej Capital. According to an EY report, MSME credit penetration is about 14 per cent in India compared with 50 per cent in the United States (US) and 37 per cent in neighbouring China. 

There is a credit gap of Rs 25 trillion for the Indian MSME sector, highlighting the large untapped credit market. Talking about the existing challenges, Gupta in an interview with BW Businesssworld said, “The MSME sector is indeed diverse, and scaling within it requires both precision and adaptability.” Edited Excerpts:

How do you assess the current credit landscape for MSMEs in India, and what role do you see NBFC players like Godrej Capital playing in addressing the sector's financing needs?

When we take a look at the credit landscape for MSMEs in India, it is clear there is a significant credit gap. There are many segments—especially in tier 2 and tier 3 geographies—that are still underserved. We aim to provide flexible and accessible financing solutions that help individuals and businesses thrive. For instance, we accept a diverse range of collaterals, making it simpler for customers to obtain the funding they require. We combine advanced technology with valuable customer insights by streamlining credit assessments and developing lending models that cater to the specific needs of our diverse MSME segments. 

What impact has the pandemic had on MSMEs' financial behaviour, and how has Godrej Capital adapted its strategies to support this segment?

The pandemic really showcased the grit and resilience of our country’s MSMEs, but it also highlighted the importance of financial prudence. Nowadays, MSMEs are all about cash flow management and need quick, flexible financing to navigate uncertain times. At Godrej Capital, we have adapted our strategies to support these needs. For example, our Flexi Funds work like an overdraft, allowing businesses to withdraw and repay instantly based on their cash flow cycles. Additionally, our Design Your EMI feature lets MSMEs choose interest-only payments for certain cycles, which helps ease cash flow pressure. We have also streamlined our digital onboarding process to make it quicker and easier for businesses to access credit—something that’s crucial as they work on recovery and growth.

With increasing competition in the digital lending space, how does Godrej Capital differentiate itself in terms of product offerings, customer experience, and risk assessment?

At Godrej Capital, we are all about making finance work for our customers in real, tangible ways. Artificial intelligence (AI) and machine learning (ML) solutions have been a game-changer for our customer service, giving faster, more personalised support, and soon, we will use them for smarter, data-backed credit assessments. This means better, quicker decisions that help our customers without compromising on financial stability. We are also expanding our reach to serve underserved communities. As a step towards inclusivity, in addition to MSME loans, we have started dairy farm loans to support rural entrepreneurs and contribute to nation-building from the ground up. Eventually, we will foray into supply chain financing and personal loans, as well.

Critics argue that NBFC companies prioritise growth over risk assessment, potentially leading to increased NPAs. How does Godrej Capital balance growth ambitions with prudent risk management?

We absolutely prioritize responsible growth. While we have ambitious goals—having reached an asset under management (AUM) of over Rs 14,000 crore in just four years and aiming for Rs 17,000 crore by year-end—we achieve this sustainably. For us, growth and risk management go hand in hand, supported by a robust risk management framework backed by data analytics and advanced AI tools.

We know that customer-centricity and strong governance are important pillars for sustainable growth, so we prioritise transparency prudent lending, and thoughtful risk assessment alongside our product innovations. By maintaining this balance, we are able to grow at scale while ensuring our lending practices remain both responsible and supportive of our customers’ success.

Some industry experts suggest that MSME-focused lenders may struggle with scalability due to fragmented customer bases. How does Godrej Capital plan to address this challenge?

The MSME sector is indeed diverse, and scaling within it requires both precision and adaptability. For us at Godrej Capital, the answer lies in using technology to bring efficiency and reach even to the most fragmented segments. We are able to automate credit assessments, tailor customer engagement, and optimise our risk management. This means we can scale responsibly without compromising on the quality or the depth of service we provide, even as we grow.

Being part of the 127-year-old Godrej legacy, we believe that bridging the credit gap isn’t just an opportunity—it’s a responsibility. While challenges exist, our approach is to simplify processes, streamline digital channels, and ensure that MSMEs, big and small, can access funding when they need it most. Scalability for us is about inclusivity—by making credit accessible across a wide range of businesses, we support the growth of India’s MSME sector with both agility and resilience.

With rising competition from banks and other NBFC players, how does Godrej Capital intend to maintain its market share and pricing power?

We are all about blending the speed and innovation of an NBFC with the trust and reliability that the Godrej name has built over 127 years. As a late entrant in the NBFC space, we are focused on offering a standout customer experience, putting convenience, speed, and trust at the centre. Along with innovative product offerings, and competitive rates, we’re also investing heavily in tech to make the loan process as smooth as possible—quick approvals, easy access to funds, and a transparent process. This customer-first approach is what keeps people coming back to us and builds long-term loyalty beyond just pricing.

What are your thoughts on the regulatory environment for NBFC companies in India? What contingency measures does Godrej Capital have in place to mitigate potential risks associated with economic downturns or regulatory changes?

India’s regulatory setup is very robust and that is a positive. Good regulations keep things fair, build customer trust, and help the whole industry grow responsibly. To tackle economic swings or new regulatory shifts, we keep our portfolio diverse and have a strong risk assessment in place, giving us the flexibility to adapt quickly. Bottom line: we believe that meeting these standards is not just about following rules—it’s about doing right by our customers and staying rock-solid in the long run.

What are your key priorities for Godrej Capital's marketing strategy in the next 12-18 months? How do you envision Godrej Capital evolving to address emerging trends and technologies in the financial services sector?

Our marketing strategy is all about creating awareness, building trust, and showcasing our innovative products designed to help MSMEs succeed. Our marketing teams are excellently increasing brand awareness through 360-degree marketing strategies that leverage digital and social media platforms. We’re also putting a lot of focus on enhancing our digital portal, making it even more comprehensive than it already is. With many services available online, we’re working hard to minimize the need for branch visits. 

Plus, we’re excited to roll out our online portal in vernacular languages so that more people can access our services easily. Over the next 18 months, we want Godrej Capital to be known as the go-to for reliable and accessible financial solutions that truly cater to the evolving needs of India’s MSMEs.