Non-banking financial companies (NBFCs) are projected to outpace banks in earnings growth through FY29, buoyed by strong gold loan performance, lower credit costs, and operational efficiencies, signalling a shift in the financial sector landscape.
Non-banking financial companies are on course to outpace banks on earnings growth through FY29, as lower credit costs, faster asset growth and productivity gains support profitability, according to the briefing cited in the lead material. The outlook points to a 27% compound annual earnings growth rate for NBFCs over FY26 to FY29, versus 16% for banks, even as the broader lending environment remains competitive.
Gold financiers are expected to remain the sector’s sharpest growth engine. Crisil Ratings said the assets under management of gold-loan NBFCs could exceed ₹4 trillion by March 2027, helped by elevated gold prices, a stronger shift towards secured lending and looser loan-to-value rules. The rating agency expects that segment to grow at about 40% a year between FY25 and FY27, after a 27% CAGR in the previous two-year period.
That momentum has already been visible in recent quarters. The lead report said gold financiers led NBFC growth in Q1FY27 with 57% year-on-year AUM expansion, while diversified lenders grew 24%. Microfinance, by contrast, is expected to recover more gradually. Separately, Business Standard reported that NBFCs were among the top earnings performers in Q4FY26, underscoring the sector’s resilience even as market conditions remain uneven.
The banking side of the story is more restrained. The lead report said banks posted 18% year-on-year credit growth in Q1FY27, but margins came under pressure because of pricing competition and only limited benefit from deposit repricing. Credit costs, however, fell by more than half from a year earlier, offering some relief to profitability. Analysts are watching funding costs, net interest margins, FCNR deposit mobilisation, the pace of unsecured credit recovery and the shift to the expected credit loss regime as key variables for the next phase of performance. Crisil has also said gold-loan NBFC profits should stay healthy, with return on managed assets projected at 4.25% to 4.5% over the next two fiscal years.
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