Non-banking finance companies (NBFCs) are likely to post stable growth in assets under management (AUM) and net interest margin (NIM) in Q1FY26, according to analysts.
“We expect AUM growth to remain fairly strong for most financiers, with our coverage universe NBFCs reporting AUM growth of 21% and 5% YoY and QoQ, respectively, primarily driven by vehicle financiers (+19% growth YoY) and diversified financiers (+24% growth YoY). Margins are expected to remain steady for housing financiers and diversified financiers,” said Axis Securities in a pre-Q1FY26 earnings report.
While micro loan and vehicle finance focused NBFCs will likely report an improvement in NIM, backed by a combination of lower interest reversals, easing of excess liquidity, and marginally lower cost of funds (CoF), gold loan NBFCs may continue to see pressure on margins, the brokerage said. The RBI in June relaxed certain aspects of its proposed draft guidelines on gold loans in the final norms. The regulator said lenders can maintain an 85 per cent loan-to-value (LTV) ratio for consumption related gold loans below ₹2.5 lakh, as against the earlier proposed 75 per cent.
Brokerage Motilal Oswal said during Q1, NBFCs’ loan growth exhibited mixed trends across segments, with gold financiers seeing very strong growth, micro loan financiers reporting a decline in AUM due to muted disbursements, vehicle finance growth moderating slightly due to seasonality and weak auto industry volumes, and weak disbursements in the home loan segment for large housing finance companies (HFCs) as they had to let go of some business amid price competition from banks.
“CoF for most NBFCs has seen a minor sequential decline because of the repricing of EBLR borrowings. The transmission through bank MCLR has been limited, as not all banks have reduced their MCLR (marginal cost of funds based lending) rates,” the brokerage said.
“Even among those that have, the benefit to NBFCs has been marginal, at 10-15 basis points (bps) only. A more meaningful transmission of policy rate cuts through MCLR cuts for NBFCs is likely to begin from July 2025,” it said.
According to Centrum Broking, typically, the first half of the fiscal has been relatively moderate for auto finance NBFCs and affordable HFCs, on both counts of AUM and asset quality. The brokerage expects the trend to continue in the current fiscal, with a marginal rise gradually in credit costs sequentially across all NBFCs under its coverage.
NBFCs’ management commentary on growth visibility, asset quality movement, and the impact of rate cuts on margins would be keenly eyed during Q1FY26, analysts say. ENDS
Published on July 8, 2025
