Hi everyone,  

Welcome to the 162nd edition of The Pattern, a weekly where we dive into the latest from the world of economy, technology and finance. Let’s get started!  

And what a week it’s been! Indian lending finally tipped the scales in favour of borrowers! 

With the RBI scrapping pre-payment penalties on floating-rate loans for small businesses, the National Housing Bank (NHB) asking housing finance companies to pay borrowers interest on advance EMIs, and the Finance Minister asking lenders to focus on customer-first lending practices, the past week in finance felt Freddie Mercury singing ‘We Are the Champions’ at Wembley—borrowers cheering in the front row. 

The direction looks clear—more power in borrower's hands.

Let's take a look back at what happened over the past week. 

Chapter one: All power to the borrowers 

Earlier, if a small business wanted to pay off a loan early or switch to a lender with a lower interest rate, they had to pay a big penalty. The borrower often ended up paying 2–5% of their total loan amount. 

"On a ₹20-lakh loan, that (foreclosure fees) is ₹40,000-80,000 just to walk away. For small businesses, that's a deal-breaker. RBI's move eliminates that burden and opens the door to real choice," said Adhil Shetty, CEO of BankBazaar.com. 

Recently, the RBI barred all banks and NBFCs from charging any pre-payment charges on floating-rate loans offered to MSMEs. As of January 1, 2026, borrowers can pay off their loans early or switch to a better lender without incurring a hefty penalty. 

The message is loud and clear. Flexibility is now a right, not a perk, especially for women-led businesses, first-generation entrepreneurs, and kirana owners. Since most of them operate on razor-thin margins, that cash can cover rent, salaries, or even inventory, instead of evaporating on penalties.  

With lower switching costs, this directive will also push lenders to compete on merit. Lenders will need to earn loyalty through better interest rates, faster service, and transparent terms. This rule applies to business loans for small enterprises or individuals, and other floating-rate loans from banks and financial institutions. 

But the gifts didn't stop pouring in there. The National Housing Bank stepped in with another customer-first, powerful move.  

The issue?  

Some borrowers pay their EMI ahead of time. However, many housing finance companies retain that money or do not adjust it immediately. It’s parked with them, and you don’t even get any interest. In short, your money works for them, not for you. 

Now, the NHB has made it clear: if the borrower's early EMI isn't adjusted immediately, the lender must pay the interest on it, and that too at the same rate applied to the customer's home loan.  

This rule ensures your money earns while it waits. It discourages opaque accounting, reaffirms something often forgotten in financial services, that borrowers’ money deserves the same respect as lender's capital.  

Speaking of respect, it wasn't just the RBI pushing for fairness this week.  

At the NBFC Symposium 2025 held in Delhi, Finance Minister Nirmala Sitharaman brought borrower dignity into the limelight, reminding lenders that financial inclusion cannot become a cover for financial exploitation. Lending must be empathetic, not aggressive. 

NBFCs are often the first lenders to reach the smallest towns, remote districts, or even thin-file borrowers. And because of this proximity, NBFCs hold enormous power, which must be matched with equally high responsibility.  

So, she urged NBFCs to set reasonable, fair, and explainable interest rates. Further insisting that, when it comes to repayment, recovery practices must be fair, empathetic, and respectful. 

Chapter two: NBFCs stepping out of the shadow 

That was one side of the story—where the FM criticised NBFCs and reminded them of their responsibilities.  

Sitharaman mentioned, "NBFCs are no longer 'shadow banks'—their stronger regulation and oversight is the best testimony of their importance in the financial system and the broader economy".

So, what is the vision and mission of the finance ministry?  

By 2047, NBFCs should shoulder at least 50% of the total credit disbursed in high-growth, high-impact sectors such as MSMEs, green energy, and affordable housing. To reach there, she called for stronger partnerships between banks and NBFCs through co-lending, and the right policy environment enabled by the government.  

NBFCs are already the last-mile credit lifeline for millions. As they grow stronger, more innovative, and co-lending focused, borrowers—especially in tier-2 cities, semi-urban belts, informal sectors, and thin-file borrowers—stand to benefit the most. 

This ripple effect will bring easier access to loans for homes, businesses, education, and emergencies. More competition means fairer interest rates. Better governance means more transparency. And deeper reach means true financial inclusion, not just on papers, but in real lives. 

But this ambition comes with a caution sign. 

The FM warned that NBFCs' appetite for risks must be carefully planned and supported by better risk management and strong internal controls. All we need to see is how NBFCs manage liquidity mismatches and weak governance so that it doesn't derail this expansion. 

This week's developments paint a coherent picture. The RBI, NHB, and the Finance Ministry are working in tandem to build a financial system that's fair, accessible, and responsive to the people. 

Borrowers now have more choices, firmer rights, and greater respect. 

This week’s wins are like the sturdy bricks in a much bigger wall we’re all trying to build—true financial inclusion. We have miles to cover before we achieve that, but the foundation is looking solid right now. 

That's a wrap for this week! I’ll see you again next week. As always, leaving you with a few reads to explore. Have a great weekend! 

Reading List: 

1. 1. Indian banks' systemic deposit growth gain momentum but NIM likely to dip 30bps (YoY): Report 

2. 2. Less than 25% of retail loans went to first-timers in FY25 

3. 3. High-value personal loans surge as lenders grow cautious 

4. 4. India liquidity surplus may not push growth in bank credit up, JP Morgan economists say 

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on X here and follow FinBox on LinkedIn to always get all updates. 

Cheers, 

Mayank