NBFCs To Report 16 Per Cent Loan Growth In Q4, Margins Under Pressure, Says Report

Non-banking financial companies (NBFCs) are likely to record a growth in loans of approximately 16 per cent per year-on-year (y-o-y) and 4.80 per cent quarter-on-quarter (q-o-q) in the March 2026 quarter. The rise can be attributed to the seasonal demand and revival of credit activity after changes in Goods and Services Tax (GST).

Assets under management (AUM) is likely to grow in segments. Housing finance companies (HFCs) will likely report 10 per cent annual growth, whereas vehicle financiers will report approximately 16 per cent growth. Diversified lenders are projected to experience greater growth of close to 27 per cent, and gold lenders are likely to record growth of up to 50 per cent annually, according to a report by Motilal Oswal Financial Services.

Disbursement Trends

The disbursement activity has remained steady throughout the quarter, with the assistance of the seasonal demand trend. Vehicle finance and unsecured lending segments, including personal loans and business loans, have continued to be proactive, ET reported.

Microfinance institutions were also recorded to have improved sequentially following previous contraction. AUM in this segment is estimated to grow around 10 per cent quarter-on-quarter.

Asset Quality Trends

The asset quality indicators across segments improved throughout the quarter, backed by various trends and seasonal indicators. Microfinance lenders are likely to report a moderate increase in the level of portfolio at risk, and sequential decrease in credit costs, the report said.

At the same time, external factors, including geopolitical dynamics, such as the West Asia conflict, will likely impact the borrower cash flows in terms of inflation and the impact on export-based industries, the report added.

Margin Pressures

The report said that margins are expected to stay on a small scale. The rate of interest in the debt markets/ bond yields have remained high, curtailing the decrease in the cost of funding. The cost of borrowing is likely to be maintained at a higher level.

It added that lending yields are still impacted by the competitive pressure of banks. This is more apparent in housing finance where net interest margins have been influenced by the price competition.

Segment-Wise Trends

Margins might also be influenced by competitive pricing, and HFCs are expected to record consistent disbursements. The competition among the affordable housing lenders is also on the rise and this could affect the yields on new loans, according to the report.

The report said that vehicle financiers will experience further growth, though there could be signs of a slower pace of the commercial vehicle market towards the end of the quarter.

On the other hand, gold financiers are estimated to have good growth in their portfolio, as the gold prices will be higher, and some of the lenders will record more than 50 per cent annual growth. Meanwhile, pricing changes and moving to loans with higher tickets could impact margins.

“Growth in AUM is expected to be higher with diversified lenders reporting which will be backed by the activity levels in unsecured lending and trends of operations. In comparison, power financiers will record lower growth rates of approximately 3 per cent year-on-year because of the low disbursements, but there is an improvement in the asset quality indicators,” the report said.

Profitability And Short-Term Perspective

The report said that net interest income (NII) and pre-provision operating profit will increase by around 15-16 per cent annually, whereas profit after tax (PAT) will increase by approximately 30 per cent.

The March quarter has shown consistent performance trends in segments. The changes in the global situation and oil prices can impact on the trends in lending and quality of assets in the ensuing months, the report further said.