Non-banking financial companies are projected to grow their education loan portfolios by 20% to ₹94,000 crore by FY27. This growth comes as students shift focus from the US to countries like the UK and Germany, helping NBFCs diversify their lending risk.
The education loan segment managed by Indian non-banking financial companies (NBFCs) is expected to reach ₹94,000 crore by the end of fiscal year 2026-27, according to a recent report by Crisil Ratings. This projection represents a 20% growth as lenders look to broaden their geographic focus in response to changing student preferences.
Shifting Student Preferences Beyond the US
The US market has traditionally been the primary destination for Indian students seeking education loans. However, changing visa policies and concerns over post-study work opportunities have led to a noticeable shift. As of March 31, 2026, the US share in the total assets under management (AUM) for these NBFCs fell to 43%, down from 54% in the previous year.
In place of the US, students are increasingly choosing the United Kingdom, Germany, and Ireland. The UK now accounts for 29% of the education loan portfolio, compared to 20% a year ago. For NBFCs, this geographic diversification is beneficial as it reduces the risk of being too dependent on a single country's immigration or labor market policies. This strategic shift helped offset a 57% decline in US-linked loan disbursements observed in the last fiscal year.
Asset Quality and Repayment Trends
Despite the evolving global environment, the asset quality for these loans remains strong. As of March 31, 2026, the 90-day past due (dpd) figure—a key measure of loan defaults—stood at a low 0.2%. A large portion of these loans, about 73%, is still within the moratorium period where students are not yet required to pay the principal.
As more loans transition into the repayment phase, the 90-day past due for active borrowers is approximately 0.8%. This suggests that students are generally maintaining their repayment schedules even amid a tougher international job market. The combination of strong prepayments and stable repayment performance has provided lenders with confidence in the segment.
Monitoring Future Portfolio Performance
While the sector is growing, investors should track how these NBFCs manage the transition of loans from the moratorium phase to full repayment. As the volume of active repayment increases, maintaining low default rates will be a key factor for the profitability and stability of these lenders. Additionally, while the diversification into countries like Germany and Ireland lowers concentration risk, it also requires lenders to keep a close watch on the specific economic and policy changes in those regions that could impact the future ability of students to secure employment.