Non-banking financial companies (NBFCs) and micro-finance institutions (MFIs) experienced significant gains in Wednesday's trading session. According to reports from Business Standard, CreditAccess Grameen, Mahindra & Mahindra Financial Services, and Cholamandalam Investment and Finance Company surged between 5% to 8% on the BSE during intra-day deals. L&T Finance, Shriram Finance, Satin Creditcare Network and Spandana Sphoorty Financial were up between 3% to 4%, demonstrating broad-based strength across the NBFC sector. The rally reflects strong investor confidence in the sector's growth prospects and market positioning.
Gold loans emerged as one of the fastest-growing retail credit segments, with their share in overall retail credit sourcing rising sharply from 18% in FY23 to 41% in FY26, according to an Experian report titled 'Gold Loans in Transition'. The growth was supported by a sharp increase in gold prices, with international gold prices rising 130% over the last five years. As per Experian, customers are increasingly choosing gold loans, leading to a visible shift in the overall lending mix. Compared to other retail credit products, gold loans are seeing stronger momentum and higher customer traction. The gold loan portfolio is gradually migrating towards higher-value loans—around ₹3 lakh—as the underlying asset becomes more valuable. Public sector banks continue to hold the largest share of the gold loan market but witnessed a decline in market share to 58% in March 2026 from 62% in March 2023. In contrast, finance companies/NBFCs gained market share significantly, with their share in industry assets under management doubling to 20% from 10% over the same period.
CRISIL Ratings has confirmed that domestic gold-loan lenders are well protected against potential sharp corrections in gold prices, despite higher regulatory loan-to-value (LTV) limits of 85% for loans below ₹5,00,000. According to CRISIL, strong risk-management practices including regular monitoring of gold values, conservative lending ratios, and timely auctions have helped keep credit losses negligible. The agency's analysis showed that lenders can recover the full principal amount even if gold prices decline sharply, with the steepest price fall over a 90-day rolling window period being around 20%. As per CRISIL, ultimate credit costs for gold-loan lenders are influenced by three key factors: prepayments before scheduled maturity, LTV levels at disbursement and on a mark-to-market basis, and the effectiveness of risk-management measures. Most lenders continue to operate at conservative LTV levels of 65-75%, reflecting their preference for maintaining adequate buffers, while regulations permit up to 85% LTV for loans below ₹5,00,000.
The industry is gradually shifting towards a more private and NBFC-led sourcing model supported by stronger distribution reach and faster customer servicing, as noted by ICICI Securities in a report cited by Business Standard. NBFC-MFIs remain the largest contributor to the microfinance industry, accounting for 43.7% of the total industry portfolio as of March 31, 2026. In sourcing gold loans specifically, the market share of non-bank finance companies has doubled to 44%, while that of PSU banks fell to 37% from 53% over the last six quarters ending March 2026. Despite the overall industry portfolio contracting by 11.7% year-on-year driven largely by banks scaling back their microfinance books, NBFC-MFIs demonstrated relative resilience with a comparatively modest decline, resulting in a marginal gain in market share. Recent regulatory developments, including the reduction in qualifying asset requirements to 60% of total assets, provide greater flexibility to expand and diversify product offerings, further supporting the sector's transformation.
According to CRISIL reports cited by Business Standard, NBFC AUM is expected to grow at a mid-teen rate through FY 2026–27, potentially surpassing ₹50 trillion. By 2025, the sector's total assets reached approximately ₹45 trillion, reflecting its deepening role in India's credit landscape and its increasing relevance in bridging structural financing gaps. The medium-term outlook remains constructive yet balanced, supported by strong consumption demand and the ongoing formalisation of credit in the economy. However, factors such as elevated funding costs, intensifying competition and tighter regulatory compliance requirements may exert pressure on margins. Continued investments by corporates and fintech players in digital lending ecosystems are also likely to reshape the competitive landscape, requiring NBFCs to maintain disciplined underwriting and prudent capital management for long-term sustainability. CRISIL notes that while higher permissible LTVs and potential volatility in gold prices warrant monitoring, the loss-given-default risk in the segment remains structurally low.
