India’s non-banking finance companies are turning increasingly to gold, housing and vehicle loans as tighter rules and margin pressures weigh on microfinance growth.
Non-banking financial companies are leaning more heavily into secured retail lending as credit to microfinance and self-help group loans fell by the end of December 2025, according to the Reserve Bank of India’s October Bulletin. The central bank said the decline reflected tighter regulatory guardrails and a wider shift by lenders towards products backed by collateral, even as retail lending remained a major engine of growth for the sector.
The RBI said retail and industrial lending were the main contributors to overall credit expansion among NBFCs, with retail loans continuing to grow quickly because of lenders’ established presence in that market. That trend has been reinforced by stronger demand for gold, housing and vehicle loans, which have become increasingly important to NBFC balance sheets.
Recent industry data points in the same direction. In the first quarter of FY27, retail credit outstanding rose 19% from a year earlier to ₹178.2 lakh crore, while disbursement growth was especially strong in personal loans, consumer durables and auto finance, according to ETBFSI. Gold loan outstanding climbed 62% year on year to ₹21.7 lakh crore as of June 2026, lifting its share of total retail credit to 12.2% from 10.9% in March.
At the same time, the microfinance market has been under pressure. ETBFSI reported that the industry’s total portfolio contracted 12% year on year in the June 2026 quarter to ₹2.69 lakh crore, even though disbursements rose 17%. The mix also shifted towards larger-ticket borrowing, with loans above ₹75,000 accounting for 41% of disbursements, underscoring how lenders are moving up the risk-and-return curve.
That repositioning reflects a broader effort by NBFCs to protect margins as borrowing costs rise. ETBFSI has reported that lenders are increasingly favouring retail and MSME loans, which typically yield more than corporate credit, while improved collections, lower slippage and easing credit costs have supported the sector’s earnings outlook. Some lenders are moving deliberately in that direction: CreditAccess Grameen has said it wants to scale back its dependence on microfinance and build out secured lending, including home loans, as it aims to become a ₹50,000 crore company by 2028.
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