Research Report

GST rate cuts to offset the impact of tariff wars and global uncertainties. NBFC-Retail (excluding HFCs) AUM growth is estimated at 16-18% YoY in FY2026. Asset quality to remain under some pressure. Profitability of the NBFCs would moderate to 2.2-2.4% in FY2026.  Further, global macroeconomic uncertainties, have added to the downward pressure on growth. In this context, the recent goods and services tax (GST) rate cuts would go a long way in buttressing consumer demand, thereby supporting the AUM growth. Overall, ICRA expects the NBFC-Retail segment to grow at a moderate pace of 16-18% in FY2026. 

• Asset quality risks remain elevated, impacted by the fast-paced growth of the earlier years. Write-offs increased significantly in FY2025 and would continue to be elevated in FY2026 as well, as entities prefer to accelerate their technical write-offs to keep delinquencies under control.
  
• Incremental funding (over and above the refinancing of maturing debt) from the banking sector was negative in 5M FY2026. Consequently, entities had to rely on funding from other sources such as market issuances, external commercial borrowings (ECB), and securitisation.
  

Source: ICRA Research; Note: 1- NBFC – Housing Finance Companies; 2 – NBFC – Infrastructure finance companies; Sector – NBFC-Retail/Wholesale, HFC-Retail/Wholesale, NBFC-Infra; Sammaan Capital Limited has been reclassified as NBFC from HFC, given the change in its constitution; Piramal Finance Limited has also been reclassified under NBFCs and excluded from HFCs