Margin pressure persists in Q1 FY2026; earnings likely to remain healthy with return on managed assets (RoMA) of 1.8-2.0% in FY2026 supported by low operating expenses and credit costs. Slight uptick in the reported GNPAs in Q1 FY2026 in line with past trends, however, overall asset quality remains comfortable. ICRA estimates a healthy growth of 14- 16% for HFCs’ on-book portfolio in FY2026.

• The net interest margins (NIMs) remained under pressure in Q1 FY2026 amid elevated competition from banks and limited transmission of rate cuts. Nevertheless, profitability is projected to remain healthy, supported by stable operating expenses and low credit costs.
  
• Funding costs have been reducing with larger HFCs reducing their cost of funding at a faster pace by tapping the debt capital markets whereas small HFCs saw limited benefit. Nonetheless, fund-raising from debt capital markets dropped in Q2 FY2026 with increase in yields.
  

Source: Financials/investor presentations of various HFCs, ICRA Research; P – Projected; Total net income = Net interest income + Other income; Ratios are with respect to average managed assets (AMA)