Synopsis: NBFCs are gaining a larger market share of India’s personal loan growth as banks become more cautious. The consumer finance industry is experiencing a revival owing to quick approvals and technology-driven models, which will continue to change retail lending in the financial year 2025 and later.
India’s retail lending market is changing fast, and honestly, NBFCs are leaving banks in the dust when it comes to personal and consumer loans. In FY25, NBFCs reported 20 percent credit growth while banks managed just 12 percent. That’s an eight-point lead for NBFCs. You can see it in market share, too. NBFCs now handle 41 percent of new personal loan disbursements by value, up from 27 percent two years earlier. Meanwhile, banks, both public and private, have slipped down to just 28 percent.
Why NBFCs Are Growing Faster Than Banks?
This isn’t just some temporary trend; NBFCs have real advantages. They can approve and disburse loans in hours, while banks tend to drag their feet for days. Plus, NBFCs are happy to serve folks looking for small loans, a group banks usually don’t bother with. In FY25, NBFCs powered by fintech processed 76 percent of personal loan volumes, but in terms of loan value, banks have a market share of 61 percent. The average loan size is just nearly Rs 10,000, banks usually skip these customers, but NBFCs use tech and data to assess risk and scale up, reaching people that banks ignore.
After the RBI hiked risk weights on unsecured consumer loans in November 2023, to curb excessive risk-taking and overheating in personal loan growth, NBFCs bounced back quicker than banks. They tightened their credit checks, teamed up with banks in co-lending partnerships, and managed to keep risk in check while still growing. Meanwhile, GST cuts kept people spending. Banks, on the other hand, had to deal with pricier deposits, which made them less aggressive with lending. Demand for personal loans stayed strong through all this, and honestly, it’s all played right into the hands of NBFCs.
Industry Overview
India’s personal loans industry is on track to grow steadily over the next few years. The market is set to expand its footprint from the current USD 689.5 billion (Rs 61.37 lakh crore) in 2025 to USD 1,217.19 billion (Rs 108.33 lakh crore) by 2031, growing at a good CAGR of nearly 10 percent. That’s almost doubling, thanks to more people needing credit and financial services reaching further. Non-Banking Financial Companies, or NBFCs, are picking up speed as the fastest-growing players. The northern region still leads the pack, with strong economic activity and more people taking on credit.
Looking forward, NBFCs are set to keep growing, with loan books likely to rise about 15–17 percent in FY26. For investors, this spells a long-term opportunity. NBFCs with sharp digital tools and solid risk controls are in a great spot to keep growing earnings, turning them into real standouts in India’s changing credit scene. So, which are the stocks that investors might keep under their radar?
Bajaj Finance
Bajaj Finance continues to dominate the personal loan space, backed by strong growth momentum and a massive customer base of over 11 crore. The company continues to gain market share in personal loans and is targeting 50 million loan disbursements and over Rs 5 lakh crore AUM in FY26, underlining its scale and execution strength. Additionally, it holds a staggering 54 percent market share in the consumer loan space (by loan disbursement).
Despite this leadership, Bajaj Finance still has only 2.8 percent share of retail AUM, even though it accounts for 12.5 percent of total loan disbursements, highlighting a significant opportunity to deepen wallet share. Technology remains a key driver, with AI-powered voice bots disbursing Rs 5,300 crore of personal loans annually and 37 percent of services now automated. Supported by a low net NPA of 0.44 percent and a healthy ROE of 19.2 percent, Bajaj Finance combines growth, efficiency, and asset quality, making it one of the strongest NBFC plays on personal loan expansion.
Shriram Finance
Shriram Finance ranks among the top non-banking financial companies (NBFCs) in India, enjoying a robust presence in the rural and semi-urban markets. This is backed by an extensive network of over 3,200 branches.
The company primarily concentrates on vehicle financing and MSME lending, which, as a result, naturally provides it with a deeper penetration beyond the metro cities. Its balance sheet is quite sound, with net NPAs at close to 2.5 percent and capital adequacy of nearly 21 percent, thus giving assurance of good asset quality and the ability to grow.
Even though personal loans account for a very small share of the total loan book as of now, this also provides space for a slow increase without taking too much risk. Also, it is to be noted that it has steadily increased its footprint in the personal loans space over the past few quarters. Moreover, the company’s 240 percent interim dividend for FY26 is indicative of a very good cash flow and a shareholder-friendly policy, thus making Shriram Finance a stable NBFC play with long-term growth prospects.
Tata Capital
Tata Capital is shaping up to be a well-diversified and rapidly growing NBFC that is backed by the Tata Group and is strongly focused on retail and SME lending. Its core NBFC business, as of Q2 FY26, has a reported AUM of around USD 24 billion with a 22 percent year, on, year growth. At the same time, PAT has increased by 33 percent YoY, which indicates that the company is making good profits as it is expanding.
The loan book is mostly focused on the retail and SME sectors, which account for about 88 percent of the exposure, and the quality of assets is still good with net NPAs of around 0.6 percent. The company has also accelerated the implementation of technology by making around 97 percent of retail onboarding and disbursements digital, which is supported by a growing physical presence of over 1,470 branches across India.
With a strong parentage, improving returns (ROE ~13 percent, ROA ~2 percent), and better access to capital after the listing, Tata Capital is a relatively lower-risk, high-growth NBFC play for investors who want to benefit from India’s retail credit cycle, which is expanding.
India’s lending market is transforming, with non-banking financial companies (NBFCs) clearly outpacing banks in personal and consumer loans. Their quicker loan approvals, larger reach, and vigorous adoption of technology are enabling them to grow at a faster rate. With credit demand remaining robust, prudently managed NBFCs may still reap the benefits of this structural change in the long run.
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