India NBFCs‘ liability tightrope

Research evidence excerpt

India NBFCs‘ liability tightrope

FICC Research

Credit Research

3 August 2026

Focus

India NBFCs' liability tightrope

With loan asset-related risks stabilizing after balance sheet

clean-up, Indian NBFCs are increasingly focused on liability

management. Funding costs remain a key area of attention, Imtiaz Shefuddin +65 6308 4906

as sector-wide borrowing costs continue to be elevated imtiaz.shefuddin@barclays.com

despite the RBI's easing measures. Barclays Bank, Singapore

Indian NBFCs enter FY27 following a phased balance sheet clean-up , with asset-side risks

relatively stable, amid a shift towards secured loan book mix. The focus has now shifted to

liabilities, as funding costs for the NBFCs remain elevated despite the Reserve Bank of India

(RBI)'s easing policy (repo) rates. Overall, we expect earnings of the NBFCs to remain more

sensitive to funding conditions than to asset performance despite otherwise stable loan books.

NBFCs' asset quality on firmer ground

Indian NBFCs have seen a steady improvement in asset quality over the past few years. This

reflects a better portfolio mix and disciplined underwriting practices. The shift away from

wholesale lending and towards secured retail segments, along with the gradual run-down of

legacy stressed books, has reduced downside risks. This is reflected in noticeable improvements

in some key sector metrics, particularly in the GNPA ratio, which has declined to an average

2.4% as of March 2026, from 6.2% in March 2022; the improvement has transpired alongside

still-comfortable capital buffers, with sector CRAR averaging 24.6% as of March 2026 .1

Concurrently, credit growth among the NBFCs has remained robust, averaging 16.6% y/y in

FY26, supporting balance sheet growth while asset quality metrics remain stable. We expect