India's NBFCs shed two years of stress and enter earnings uptrend

An impending influx of foreign deposits will also benefit the NBFCs.

India’s non-bank financial companies (NBFCs) will enter FY2027 with cleaner balance sheets and improving growth visibility following two and a half years of asset quality challenges, according to a report by Motilal Oswal Financial Services. 

“With macro risks receding and banking system liquidity poised to improve, we believe the sector is well positioned to enter the next growth cycle from a position of fundamental strength,” the finance company said in a report on 13 July 2026.

Following the peace agreement and the correction and crude prices, NBFCs should see a broadly stable interest rate environment, Motilal Oswal said.

Risks to the cash flow of commercial vehicle (CV) operators and micro, small, and medium enterprises (MSMEs) have also receded, it said.

An impending influx of foreign deposits is also expected to benefit NBFCs.

“As banks look to efficiently deploy surplus liquidity, we expect NBFCs to benefit from
improved funding availability, stronger negotiating power and a gradual moderation in incremental borrowing costs,” Motilal Oswal said.

Motilal Oswal believes that the coming fiscal year could mark “the beginning of a broad-based earnings uptrend for NBFCs.”

“Cleaner balance sheets and improving liquidity should support stronger loan growth; stable interest rates and moderating incremental borrowing costs should provide margin visibility; and normalizing asset quality should result in benign credit costs,” it said.

In an earlier report, CareEdge Analytics and Advisory estimated that the personal loan portfolio of India’s NBFCs could cross $40.71b by FY2030.