NBFCs borrowings to hit $750 billion by FY27 as funding mix shifts

NBFC borrowings are set to reach $750 billion by FY27, with 64% expected from market-based instruments as firms pivot from bank loans to NCDs, ECBs and other capital-market funding routes

Borrowings by non-banking financial companies (NBFCs) are projected to grow at a compound annual growth rate (CAGR) of 13 per cent through FY27, reaching $750 billion, according to a report by Avendus Capital. The report attributes this rise to the diversification of funding sources, as NBFCs reduce their reliance on banks and increasingly turn to capital market instruments such as non-convertible debentures (NCDs), external commercial borrowings (ECBs) and commercial paper (CP).

 

By FY27, market-based instruments are expected to make up 64 per cent of total NBFC borrowings, compared to 43 per cent in FY24, reflecting a gradual reduction in bank credit, which currently stands at 42 per cent. Of this, ECB borrowings are projected to grow at 60 per cent CAGR, crossing $120 billion, while NCD borrowings are set to expand at around 25 per cent CAGR, exceeding $330 billion by FY27.

 

 

Snigdha Khemka, director, financial institutions group investment banking, Avendus Capital, said that NBFCs are broadening their funding sources beyond traditional bank credit, in line with regulatory guidance and market conditions, reflecting a transition in India’s financial ecosystem.

 

What is strengthening NBFCs’ shift toward market-linked funding?

 

Khemka said global index inclusion and Securities and Exchange Board of India-regulated online bond platforms have deepened the NCD market, enhancing capital access, funding stability and global integration.

 

Upper-layer NBFCs are tapping global debt markets more, with 9 of 15 increasing their ECB share from FY22 to FY25, aided by strong ratings. Meanwhile, middle-layer NBFCs favour higher-yield, flexible-maturity NCDs, with 14 of 16 raising their NCD borrowings in the same period.

 

Anshul Agarwal, managing director and head, financial institutions group investment banking, Avendus Capital, said, “A key catalyst of this diversification has been a supportive regulatory environment, particularly the Reserve Bank of India’s scale-based regulations. With ECBs and NCDs emerging as the most promising instruments for NBFCs, the next phase of growth will be driven not just by how fast they lend, but by how intelligently they fund themselves.”

 

Agarwal said that Indian NBFCs are maturing, shifting from bank borrowings to capital markets to improve resilience, reduce systemic risk and balance growth.