Will Indian NBFCs Experience 25% Growth in Education Loan AUM by FY26 Amid US Uncertainties?

New Delhi, July 9 (NationPress) Non-banking finance companies (NBFCs) in India are witnessing education loans emerge as their fastest-growing asset class, achieving a remarkable over 50% growth in assets under management (AUM) in recent years, as per a report released on Wednesday. This fiscal year (FY26), growth is projected to moderate to 25%, with AUM anticipated to reach Rs 80,000 crore.

The rate of growth is expected to shrink this fiscal as disbursements for educational pursuits in the US slow down due to several policy changes in the country, according to the report by Crisil Ratings.

In response to these challenges, NBFCs are actively diversifying into new regions and product adjacencies. While non-performing assets (NPAs) have remained relatively stable, the quality of assets will require vigilance, given the global uncertainties and the fact that a significant portion of AUM (85%) remains under a contractual principal moratorium, as noted in the report.

The education loan AUM of NBFCs surged by 48% to Rs 64,000 crore in the past fiscal year, following an even more impressive 77% growth in FY24.

“Uncertainties in US policies, coupled with reduced visa appointments and the suggested removal of Optional Practical Training norms, have significantly impacted new loan originations. Consequently, there was a 30% decrease in total disbursements to that region last fiscal,” stated Malvika Bhotika, Director at Crisil Ratings.

Even disbursements to Canada, the second-largest market, have declined as student visa regulations tightened, including increased financial proof requirements and caps on permits.

“As a result, education loan disbursements grew by only 8% in fiscal 2025, a stark contrast to the 50% growth seen in fiscal 2024,” Bhotika added.

To counteract these challenges, NBFCs are placing greater emphasis on other regions.

Disbursements for courses in the UK, Germany, Ireland, and smaller countries have doubled over the last fiscal year as students seek alternative destinations.

The share of these regions in total disbursements surged to nearly 50% in fiscal 2025, up from 25% the previous year.

NBFCs are also exploring domestic student loans and adjacent offerings such as school financing, loans for skill development, certifications, and coaching. Although the lower ticket sizes of these loans may not significantly impact the overall portfolio, they could provide some stability amid global uncertainties.

“The capability of NBFCs to scale up and sustain asset quality in these new domestic products will be essential to monitor,” remarked Sonica Gupta, Associate Director at Crisil Ratings. Additionally, the agility of NBFCs to navigate the complexities of a global landscape characterized by uncertainty and changing student preferences will be vital for continued growth and success.