India's NBFIs Surge with Confidence and Market Share

India's non-bank financial institutions are experiencing substantial growth, with larger lenders setting the pace, according to Fitch Ratings.

Fitch highlights that these lenders have built strong investor trust, allowing them to outpace smaller competitors. By September 2024, major NBFIs boosted their loan market share to 38% from 30% in March 2022, achieving a 20% annual loan growth rate, compared to the sector's 9%.

These institutions have also strengthened financially, evidenced by a reduction in their debt-to-equity ratio from 4.5 in 2021 to 4.3 in mid-2025, attributed to increased capital and retained earnings. Fitch anticipates continued growth, with many NBFIs reinvesting earnings for expansion.

Despite slow global economic growth, India's NBFI sector remains dynamic, offering a diverse array of loans. While securing loans is competitive in urban areas, rural regions see less bank competition, although higher costs and credit risks impact profitability. The focus on specific loan types often determines NBFI success, according to Fitch.

NBFIs serving non-prime customers can achieve higher margins, unless banks enter the market. Large NBFIs leverage their market strength for better funding access and cost efficiency.

Leading lenders excel despite economic fluctuations, and those linked to corporate groups have additional funding advantages. Fitch assesses NBFIs based on business stability, risk management, financial robustness, capital access, and regulatory compliance.

(With inputs from agencies.)