NBFCs' two-wheeler loan portfolio to grow 18-19% in FY26: CareEdge

GST cut and improved rural demand to support growth; lenders adopt cautious stance amid rising asset quality stress in the two-wheeler loan segment

The two-wheeler (2W) loan portfolio of Non-banking finance companies (NBFCs) in India is expected to grow at 18-19 per cent in the current financial year (Fy26), similar to the level seen in Fy25. This moderation is a consequence of financiers  cautious approach to building loan books in the wake of general rise in asset quality stress, according to CareEdge Ratings.

 

NBFCs dominate the 2W finance market with a 68.5 per cent share in FY25, driven by targeted segmentation of untapped, higher-yield borrowers and captive NBFCs leveraging synergies with parent companies.

 

Rating agency in review of segment said the 2W financing disbursements by NBFCs recorded a four-year compound annual growth rate (CAGR) of 25 per cent, amounting to Rs 74,948 crore in FY25. However, the pace of disbursement moderated to 11 per cent in FY25, down from 28 per cent in the previous year.

 

The NBFCs outstanding 2W loan portfolio grew at a 22 per cent CAGR for four years from FY21-FY25. However, the portfolio’s growth rate moderated to 18 per cent in FY25 reaching Rs 1,12,751 crore as on March 31, 2025.

 

Referring to the trend of 2w unit sales, CareEdge said the retail sales of two-wheelers grew at a 10 per cent CAGR for three years from FY21- FY24. However, growth slowed to 8 per cent in FY25 led by a high base effect, weak rural sentiments and cautious lending by NBFCs.

 

In Q1FY26, the 2W industry registered sales of 48 lakhs units, up five per cent on a y-o-y basis. Lower sales volumes witnessed in Q1 is broadly a seasonal phenomenon where the 2W sales generally pick up in the onset of the festive season in the second half of the financial year (H2).

 

Looking ahead, the FY26 sales growth is expected to be in the six-seven per cent range driven by expectation of improved rural incomes considering above-normal monsoon and higher sales in H2 post Good and Service Tax cut. The government reduced GST 28 per cent to 18 per cent on September 22, 2025, for 2W with engine capacity up to 350 cc, CareEdge added.