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“Growth momentum remains favourable for NBFCs”

ICICIdirect Research 10 Jul 2026 DISCLAIMER

The NBFC sector continues to exhibit resilience despite geopolitical uncertainties and tight liquidity conditions, with credit growth remaining healthy at 14.2% YoY in May 2026 to ₹58.6 lakh crore. Retail loans continue to anchor growth, supported by strong traction in gold loans and consumer durables. Going forward, the sector is likely to sustain its growth momentum and continue to outpace banks on credit growth.
The healthy momentum is expected to continue into Q1FY27, supported by healthy loan growth across gold, housing, vehicle finance and diversified retail segments. Recent decline in interest rates is seen to ease cost of borrowing thereby reflecting in cost of funds and resilient margin trajectory, particularly for lenders that had seen funding-cost pressure over the last few quarters.
Within the broader NBFC space, we prefer microfinance lenders as business momentum is likely to improve gradually, aided by better collections, recovery in disbursements and easing credit costs. Overall, Q1FY27 is likely to see improving margin trends for diversified NBFCs and continued recovery in microfinance and rural-focused portfolios. CreditAccess Grameen and Muthoot Microfin remain our preferred picks in this segment.

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