India's NBFC loans grew 24% in 2025 as their reliance on bank funding rose, RBI study says

Implications for lenders

Non-bank lenders that fund through bank lines should plan for funding terms that move with prudential rules as well as policy rates; India's NBFCs drew 77.2% of borrowings from banks and markets. Growth led by secured products, about about three-fourths of NBFC loans, may make collateral valuation and haircuts central to credit review. Diversifying funding sources can reduce the risk that a change in bank risk weights cuts loan supply.

Implications

Facts

Non-bank lenders: the RBI's October 2026 Bulletin, released on 23 October, carries a review of the NBFC sector for 2025. The RBI release says NBFC credit growth stayed in double digits year on year at end-December 2025, the share of bank borrowings in NBFC funding rose moderately, and NPA ratios kept declining. As reported by Business Standard, NBFC loans and advances grew 24% at end-December 2025. ¹ Secured lending makes up about three-fourths of loans and advances and was the main driver of growth. ² Gold loans accounted for 10.5% of the increase in NBFC credit between December 2024 and December 2025, which the article links to higher eligible loan values as gold prices rose. ³ Vehicle loans, the largest retail segment, slowed somewhat, and microfinance and self-help group loans declined.

Funding: bank borrowings, debentures and commercial paper together made up 77.2% of NBFC borrowings at end-December 2025. ⁴ The article links the rise in bank funding to the restoration of risk weights on bank lending to NBFCs to the levels before the November 2023 increase, and to softer bank lending rates; it says this dependence "may be monitored on an ongoing basis".

Loan pricing: a separate Bulletin article decomposes the weighted average lending rate (WALR) on banks' fresh loans. After cumulative repo rate cuts of 125 basis points between February 2025 and March 2026, the fresh-loan WALR fell 93 basis points. ⁵ Of that, 80 basis points came from repricing and 13 basis points from shifts in the composition of lending. ⁶ The RBI has since raised the repo rate to 5.50% in October. ⁷

Bank credit: in the fortnight to 15 October 2026, bank credit of scheduled commercial banks grew 18.2% year on year (11.6% a year earlier), and deposits grew 16.7% (9.5% a year earlier). ⁸

Analysis

India's non-bank lenders grew fast in 2025, and they did so largely on money borrowed from banks and bond markets. With banks, debentures and commercial paper at 77.2% of borrowings, a tightening of bank lending to NBFCs can pass quickly into non-bank loan supply; the Bulletin links the latest rise in bank funding to the restoration of risk weights that had been raised in November 2023. Growth was led by secured products, gold loans in particular, while microfinance shrank, so the expansion leans on collateral values rather than on unsecured credit. The pricing study adds a caution for anyone reading average lending rates: part of the 93 basis points fall reflected the changing mix of lending, not only cheaper loans. With bank credit still growing 18.2% and deposits 16.7% in mid-October, banks appear to have room to keep funding non-bank lenders.

Southeast Asia shows a different picture. In Indonesia, finance companies' receivables grew only 1.68% year on year in August 2026, against India's 24% NBFC growth at end-2025. In Thailand, non-banks hold about 75% of personal loan accounts as reported, so how banks price and size their lending to these firms matters for consumer credit supply. In the Philippines, the BSP raised its policy rate to 5.50% in October, as the RBI did, which makes the split between repricing and loan-mix effects relevant for reading lending-rate data there. Definitions differ (Indian NBFC loans and advances, Indonesian finance-company receivables), so the comparison is of direction and funding structure, not of levels.

What it suggests for Southeast Asia: India uses bank risk weights on lending to non-banks as a dial for non-bank credit, and publishes how much non-banks rely on bank and market funding. The Bank of Thailand, which plans to bring more non-banks under its supervision, and Indonesia's OJK, which supervises finance companies, have a reference for tracking bank-to-non-bank exposures as a separate risk, and lenders in the region may see funding costs from banks move with such prudential settings as well as with policy rates.

Counterpoints and uncertainties

The NBFC figures are as reported from the RBI study and run only to December 2025, before the RBI's October 2026 rate increase; the article gives no separate figure for bank borrowings alone, so the 77.2% share includes market debt. Gold-backed growth depends on gold prices, and a fall in prices would cut eligible loan values. India's NBFC sector differs from Indonesian finance companies and Thai non-banks in size, products and supervision, so the funding ratio would not transfer directly.