The Reserve Bank of India has issued a clear directive to non-banking financial companies, with Deputy Governor Shirish Chandra Murmu recently stating that NBFCs should prioritize asset quality over loan growth, citing their role in extending credit to underserved communities. This guidance comes as NBFCs demonstrate strong credit deployment growth, with credit registered a growth of 14.9% year-on-year compared to 10.6% a year ago, according to RBI data. The central bank's emphasis on asset quality reflects concerns about stress in certain segments, particularly agriculture and commercial real estate showing higher stress levels, as noted by Business Standard.
The retail lending landscape is experiencing a fundamental shift as NBFCs' share of retail loan originations by value rose from 20.7% in Q4 FY24 to 31.6% in Q4 FY26, according to The Economic Times citing CRIF High Mark data. NBFCs accounted for more than 91% of personal-loan originations by volume and over 86% of consumer-durable loan originations in the period covered by the analysis. NBFCs accounted for around 49% of retail loan originations by volume in Q4 FY26, compared with 31.6% by value, reflecting the smaller average ticket sizes of many loans originated by NBFCs. The trend is particularly pronounced in smaller personal loans, with NBFC-fintechs accounting for around 90% of personal-loan originations below ₹1 lakh by volume in Q4 FY26, as noted by The Economic Times. More than 65% of borrowers in that segment were below 35 years of age, highlighting the growing digital-first approach of NBFCs in reaching younger, tech-savvy customers.
Non-banking financial companies (NBFCs) demonstrated strong credit deployment growth in July 2026, with credit registered a growth of 14.9% year-on-year compared to 10.6% a year ago, according to Reserve Bank of India (RBI) data collected from major NBFCs and housing finance companies (HFCs). This represents a significant acceleration in credit expansion across the sector, with NBFCs achieving ₹59.89 lakh crore in total credit including HFCs, despite starting from a lower base compared to banks. The growth rate was lower than the 19.3% YoY growth recorded by banks during the same period, highlighting the competitive dynamics in the financial services sector. As per The Economic Times, the RBI data showed that retail loans growth accelerated to 21.4% year-on-year in July 2026, the fastest growth among major sectors, significantly higher than the 13.7% recorded in July 2025. The acceleration was led by strong growth in retail lending, particularly housing loans and loans against gold jewellery, with retail credit growth accelerating by nearly 8 percentage points year-on-year.
Gold loans from NBFCs surged 68.5% year-on-year to ₹3.54 lakh crore, representing a dramatic acceleration from last year's 43.9% growth, as reported by The Economic Times. At the end of July, the gold loan book of NBFCs stood at nearly ₹3.54 lakh crore, while banks' gold loan book reached ₹5.52 lakh crore. The latest RBI data shows that gold loans segment had witnessed a growth of 69.3% in the month-ago period, indicating sustained momentum in this high-yielding segment. Similarly, consumer durable loans expanded 51.5% to ₹74.644 crore, up from 18.8% growth in the previous year, with lending to facilitate consumer durable buys accelerated to 51.5% in July 2026, as against 46.8% in June and just 18.8% in the year-ago period, according to the latest RBI data. This strong performance in high-yielding segments has been a key driver of NBFC credit expansion, with both categories showing significantly higher growth rates than banks, as highlighted by the latest RBI data. The strong performance of gold-backed lending comes amid increased demand for loans against gold jewellery, while housing credit also remained robust. The acceleration in gold loans also comes amid a period of elevated gold prices, which have increased the value of jewellery available as collateral and enabled borrowers to raise larger amounts against existing assets.
Retail loans growth accelerated to 21.4% year-on-year in July 2026 compared to 13.7% year ago, according to RBI data. Within the retail loans segment, housing loans grew 11.9% YoY to ₹8.55 lakh crore, compared with 4% growth a year earlier, as reported by The Economic Times. Vehicle loan growth remained broadly steady at 15.1%, while credit for consumer durables grew 51.5%. The acceleration in retail lending came even as credit growth to some other major sectors moderated, indicating strong consumer demand and NBFCs' focus on retail-focused credit products across multiple segments. Outstanding retail loans rose to ₹26.06 trillion in July from ₹21.46 trillion a year earlier, with retail lending emerging as the major driver of NBFC credit growth in July, as noted by The Hindu BusinessLine. Retail loans emerged as the key growth driver for NBFCs during the month, with credit growth accelerating by nearly 8 percentage points year-on-year.
Credit to agriculture and allied activities recorded a robust growth of 18.0% year-on-year in July 2026, a substantial increase from 5.4% a year ago, as reported by RBI. However, credit to industry grew by 7.4% year-on-year in July 2026, down from 9.3% in July 2025, with moderation primarily driven by subdued growth in infrastructure, a major constituent of the segment. Credit to infrastructure grew 6.2% YoY to ₹20.16 trillion in July, compared with 8.1% a year ago, with credit to the power sector growing 6.9%, down from 12.3% year earlier. The services sector growth moderated to 15.2% year-on-year in July 2026 from 24.5% a year ago, while credit growth in services sector moderated to 15.2% year-on-year from 24.5% year ago. Credit to commercial real estate recorded buoyant expansion, while credit growth in trade and transport operators moderated to 14.7% and 10.7%, respectively, highlighting varying demand patterns across different sectors. Agriculture and allied activities credit rose 18% year-on-year to ₹80,271 crore, while services-sector credit increased 15.2%. In terms of credit distribution, industry and retail loans together accounted for over 80% of NBFC lending in FY25, with industry GNPA ratio at 2.5% and retail loans at 3%, while agriculture and allied activities accounted for less than 2% of total NBFC credit but their GNPA stood at 6% of their total loans.
The data reveals mixed performance across different market segments, with commercial real estate showing buoyant expansion while trade and transport operators segments witnessed deceleration. Credit to commercial real estate recorded buoyant growth of 22.3%, while growth in credit to trade and transport operators decelerated to 14.7% and 10.7%, respectively. Banks accounted for roughly 72% of outstanding systemic credit in FY25, according to economist Mitali Nikore citing CRISIL Intelligence's June 2025 report, yet in several retail and specialized segments, non-bank lenders are gaining ground. The ₹30 lakh crore opportunity in MSME credit gap represents a significant untapped market, with more than 90% of MSMEs accepting digital payments but only 18% having availed themselves of a digital loan, according to SIDBI-CRISIL report data cited by Nikore. Private credit market doubled over five years to around $25 billion in assets under management at the end of 2025, with annual transaction value crossing $11 billion in 2025, as noted by Moody's Ratings. Securitisation volumes reached a record ₹2.55 lakh crore in FY26, providing additional funding avenues for NBFCs while maintaining the dynamic credit ecosystem with expanded avenues for access.
