Datanomics: NBFC asset quality improves but trails banks' performance

RBI asks NBFCs to focus on asset quality as agriculture and commercial real estate show higher stress

Non-banking financial companies (NBFCs) should prioritise asset quality over loan growth, Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu recently said, citing their role in extending credit to underserved communities. NBFCs’ overall gross non-performing assets as a proportion of total loans (GNPA ratio) stood at 2.4 per cent in financial year 2025-26 (FY26), an improvement from 6.1 per cent during the NBFC crisis that began in September 2018. Even so, it remains higher than that of scheduled commercial banks (SCBs), a reversal from the pre-crisis period, when NBFCs had fared better than SCBs. Sector-wise, commercial real estate shows the highest asset-quality stress, followed by medium industry, agriculture, and micro and small enterprises. In terms of credit distribution, industry and retail loans together accounted for over 80 per cent of NBFC lending in FY25. On the other hand, the GNPA ratio for industry was 2.5 per cent and for retail loans, it was 3 per cent. Conversely, agriculture and allied activities accounted for less than 2 per cent of total NBFC credit, but their GNPA stood at 6 per cent of their total loans.