The AUM of HFCs reached Rs. 10.6 lakh crore as on March 31, 2026, up by about 15% YoY. ICRA expects a buoyant growth of 14-16% during FY2027, supported by higher growth in the NHL segment. Growth in the NHL segment has been increasing over the past few quarters, which has helped cushion margins amid intense competition in the HL segment. ICRA anticipates some uptick in NPAs amid macroeconomic uncertainties and seasoning of rapidly expanded books of medium and small sized HFCs. Nonetheless, industry-wide GNPAs are expected to remain in the healthy range of 1.5-1.7% during FY2027. Further, the sector is expected to maintain adequate capitalisation for its projected growth and returns. While a significant capital raise is not foreseen, certain HFCs may still need to secure additional funds depending on their capital position and growth objectives.

Exhibit: Trend in Cost of Average Interest-bearing Funds of HFCs