The AUM expansion decelerated in FY2025 on the back of multiple headwinds, especially in the unsecured lending segments; the AUM growth of M&S NBFC is expected to moderate to 16-18% in FY2026. The asset quality is expected to be under pressure in the near-term after the weakening in FY2025, especially in the unsecured segments, viz., MFI, SME and PL/CL.

• This report assesses the performance of medium and small (M&S) non-banking financial companies (NBFCs), defined as entities1 with assets under management (AUM) of less than Rs. 150 billion as of March 2025. These NBFCs constituted about 14-15% of the overall NBFC (excluding infrastructure financiers) AUM as of March 2025, up from about 11% as of March 2022. Their share moderated somewhat in FY2025 but is expected to be stable in the current fiscal. This note assesses their performance in relation to large NBFCs.
• These NBFCs have grown at a faster pace (5-year CAGR of 26%) than other larger NBFCs (5-year CAGR of 14%), given their smaller base and larger share of presence in high growth segments, viz., affordable housing, microfinance, loan against property (LAP), unsecured business loans (SME) and personal/consumption (PL/CL) loans.