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NBFCs well placed to outperform banks

ICICIdirect Research 28 Aug 2026 DISCLAIMER

NBFCs appear well positioned to outperform banks on growth, supported by improving system liquidity, better access to bank funding and stronger positioning in segments where banks remain relatively selective. NBFC-retail AUM is expected to grow ~18–20% in FY27, with growth broad-based across asset classes. Easing funding conditions should gradually lower incremental borrowing cost, while asset quality remains resilient across secured segments such as gold, auto and housing finance. Stress in unsecured/MFI portfolios also appears to be past its peak, with improving collections and tighter underwriting expected to drive gradual normalization in slippages and credit cost.

  • Gold loans: Strongest segment, with specialised NBFC AUM expected to grow ~40% CAGR through FY27, supported by elevated gold prices, secured-credit preference and strong borrower demand. (Capri Global, Muthoot Finance)
  • Vehicle finance: AUM growth of ~16–17%, with used vehicles continuing to outperform new vehicles; cars/UV financing could grow at relatively higher pace. (Shriram Finance)
  • Microfinance: MFI AUM expected to recover growth to ~20% in FY27, with diversification into gold/MSME/LAP supporting overall growth. (Muthoot Microfin, CreditAccess Grameen)
  • Diversified NBFCs: growth estimates for major diversified lenders are at ~18–24%, supported by MSME, rural, vehicle, gold and consumer lending. (Bajaj Finance, L&T Finance)

Unlike banks, where corporate-led growth is exerting pressure on yields and margins, NBFCs retain greater exposure to higher-yielding retail, MSME and niche lending segments. Thus, a combination of stronger AUM growth, resilient asset quality, easing funding cost and normalising credit cost should support relatively stronger earnings growth for NBFCs in FY27.

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