By Nirmal Jain
India’s debtors informed a really completely different story this 12 months, a narrative that didn’t at all times mirror the worldwide uncertainties or the cautious macro headlines that surrounded us. CY25 was a 12 months of contrasts. Whereas the exterior atmosphere confirmed uneven momentum, home credit score behaviour revealed a shift that was quieter, deeper and extra structural. Beneath the floor, a brand new rhythm emerged in India’s lending panorama, and NBFCs discovered themselves on the coronary heart of this transition.
One of the defining options of CY25 was the widening divergence in how completely different borrower segments responded to the financial cycle. Collateral backed lending, together with gold loans, secured MSME credit score and reasonably priced housing finance, continued to point out resilience. On the similar time, elements of microfinance and unsecured lending got here underneath seen stress, significantly in geographies the place family leverage had already been stretched.
Indian credit score system
This distinction highlighted that India’s credit score system is not a single monolithic story. As an alternative, it’s evolving right into a set of micro markets, every formed by its personal earnings dynamics, danger patterns and consumption behaviour. The 12 months demonstrated that India’s credit score urge for food can’t be understood by means of broad aggregates alone.
On this atmosphere, the function of NBFCs turned extra distinguished. Their skill to function nearer to the shopper, assess contextual danger and reply swiftly to altering credit score wants allowed them to step into areas the place formal credit score demand was rising.
Rising credit score portfolio of NBFCs
Sector sensible, NBFCs grew their credit score portfolios by shut to twenty% in FY25, considerably outpacing banks which expanded by 12%. This distinction will not be merely statistical. It displays the widening function NBFCs play in assembly the financing wants of households and enterprises that depend on velocity, flexibility and native understanding. It additionally displays the belief that first time debtors and small entrepreneurs place in NBFCs, significantly in semi-urban and rural markets the place personalised interactions nonetheless matter.
Two developments formed credit score situations meaningfully this 12 months. The primary was the shift in financial coverage, with the MPC delivering a measured fee reduce after a protracted section of stability. The reduce didn’t merely scale back the price of cash, it lifted sentiment in a method that always issues extra. For a lot of small companies and households, even a modest easing in charges can restore confidence to borrow and increase.
The early months following the coverage transfer mirrored this transformation in tone throughout a number of lending segments. The second improvement was GST rationalisation throughout key consumption classes reminiscent of vehicles, air conditioners, televisions and home equipment. Improved affordability, mixed with the festive season, led to a revival in discretionary purchases.
A lot of this demand, particularly in tier-II and tier-III markets, was transformed into precise shopping for selections by means of NBFC financing, the place the sector’s final mile presence and underwriting depth play an essential function.
These shifts assist clarify why CY25 could also be considered as a turning level. The 12 months didn’t redefine NBFCs. As an alternative, it revealed how India’s evolving credit score wants are aligning with the strengths that NBFCs provide. Gold backed credit score supported family liquidity, secured MSME lending allowed entrepreneurs to rebuild stability sheets and shopper financing revitalised demand in a number of classes.
In the meantime, banks continued to anchor prime retail and company credit score. Collectively, this twin construction supported stability and ensured that credit score reached each aspirational and underserved segments.
Looking forward to CY26, the outlook stays constructive. Business projections recommend that NBFCs may keep a mortgage e book progress trajectory of 15 to 17%, supported by softer fee situations, enhancing liquidity and continued public funding.
On the similar time, the self-discipline proven by the sector in strengthening underwriting, sharpening assortment frameworks and investing in digital credit score evaluation will stay essential. The divergences noticed in CY25 underscore the necessity for calibrated methods that stability alternative with prudence and mix information with human perception.
India’s financial momentum continues to be anchored in home demand, entrepreneurial resilience and a steady coverage atmosphere. Inside this panorama, NBFCs are well-positioned to broaden the move of credit score and assist progress throughout numerous areas and earnings segments. CY25 provided a glimpse of what this future could appear to be. CY26 will decide how sustainably and responsibly the sector can construct upon it, and the way confidently India’s debtors proceed to form the subsequent section of the nation’s credit score story.
(The author is Founder and Chairman, IIFL Group)
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