India’s non-banking financial companies reported a 24% jump in loan books with strong capital buffers, yet their share of financial assets dropped to 12.7% as of late 2025. While gold loans surged, the sector faces stiff competition from banks and mutual funds. Investors should track their reliance on external funding and the cooling momentum in vehicle loans.
India’s non-banking financial companies are navigating a period of strong internal growth alongside declining influence in the overall financial sector. According to a recent assessment by the Reserve Bank of India, NBFCs and housing finance companies now manage 12.7% of total financial sector assets. This represents a steady decline from the 13.9% share they held before the pandemic, signaling that other players, particularly banks and mutual funds, are capturing domestic capital at a faster rate.
Despite the dip in total market share, individual operational growth remains robust. As of December 2025, NBFCs reported a 24% increase in loans and advances. This expansion is heavily underpinned by secured lending, which makes up about 75% of their total advances. Within this mix, industrial credit continues to dominate with a 45.4% share of the loan book. Retail segments have also shown notable changes, with gold-backed loans jumping 60% over the previous year, a trend linked to higher gold prices increasing the borrowing power of customers. In contrast, growth in vehicle loans has shown signs of moderation, which is a segment investors may monitor for potential revenue pressure.
Financial stability metrics for the sector currently suggest a healthy position. The gross bad loan ratio fell to 2.7% by the end of 2025, with the net bad loan ratio standing at a stable 0.9%. Perhaps the most significant figure for safety is the capital-to-risk weighted assets ratio, which hit 25.2%. This is well above the regulatory requirement of 15%, giving the sector a comfortable safety net against potential market instability.
A critical area for investors to follow is the sector’s funding strategy. NBFCs reported a 23.3% rise in borrowing, with a heavy reliance on bank loans and market-based debt instruments. This deep integration with the banking system means that the sector’s health is tightly coupled with banking sector stability and interest rate cycles. As these companies shift toward digital infrastructure and newer business models, their ability to control funding costs while facing competition from banks and mutual funds will remain a key monitorable for the coming quarters.