NEW DELHI: India’s largest non-banking lenders – NBFCs, are not just growing – they are pulling ahead of the competition, driven by rising investor trust, stronger financials, and a firm grip on their lending niches.
According to Fitch Ratings, these well-established non-bank financial institutions (NBFIs) are expanding faster than the rest of the sector and consolidating their leadership.
Seventeen major NBFIs tracked by Fitch had increased their share of the total loan market to 38 percent by September 2024, up from 30 percent in March 2022.
These lenders posted annual loan growth of 20 percent during this period, more than double the 9 percent average growth recorded by the broader NBFI sector.
Fitch noted that large NBFIs have also improved their financial strength.
Their debt-to-equity ratio, a measure of how much they borrow compared to their own funds, declined from 4.5 times in 2021 to 4.3 times by mid-financial year 2025. This was achieved by raising capital and retaining more of their profits, particularly during and after the COVID-19 period.
Rather than relying heavily on borrowed funds, most good NBFCs are now using internal accruals to fuel growth while maintaining cautious dividend payouts. This has helped them build buffers against credit risks and financial shocks.
India’s NBFCs remain diverse
The report added that India’s NBFI sector remains diverse, with different companies catering to different segments. In urban markets, competition remains high for secured lending products like housing and auto loans.
In rural areas, some NBFIs face less competition from banks, but higher credit risks and operating costs remain challenges.
Fitch pointed out that the nature of an NBFI’s loan book plays a key role in its long-term success. Those that specialize in particular segments and have deep operational expertise tend to run more stable and profitable businesses.
Many non-bank lenders cater to non-prime borrowers — individuals who may not easily qualify for bank credit. Serving this segment allows higher lending margins, although the advantage may reduce if banks begin entering the same space more aggressively.
Larger NBFIs continue to benefit from their size and scale. They typically enjoy easier access to funding, better control over pricing, and lower costs. Those backed by large corporate groups often have additional advantages in terms of funding and brand trust.
When rating NBFIs, Fitch considers the stability of the business model, risk appetite, capital position, funding access, and adherence to regulatory norms.
Despite global economic headwinds, India’s NBFI leaders are showing that consistent strategy, scale, and investor confidence are key drivers of long-term growth.
