NBFC balance sheets expand in FY25 on loan growth; microfinance stress persists: RBI
Non-banking financial companies saw their balance sheets expand significantly in FY25, fueled by robust loan growth. While overall asset quality improved, the microfinance sector experienced a sharp rise in bad loans. Profitability for upper-layer NBFCs increased, though overall profits saw a slight dip. Key indicators like capital adequacy remained strong.
Mumbai: Balance sheets of non-banking financial companies (NBFCs) continued to expand in FY25, driven by strong growth in loans and advances, even as pockets of stress emerged in the microfinance segment, the Reserve Bank of India (RBI) said in the Trend and Progress of Banking in India report published Monday.
The total balance sheet of NBFCs expanded 18.9% to ₹61.09 lakh crore in March 2025, up from ₹51.39 lakh crore in March 2024, which further rose 7.2% in the current fiscal year to ₹65.51 lakh crore, as of September 2025. Profitability improved, with net profit of upper layer NBFCs rising to ₹48, 873 crore in March 2025 up from ₹38,618 crore in March 2024, while these NBFCs reported ₹27,019 crore in profits during the first six months ended September 2025. However, profits of all NBFCs fell to ₹1.32 lakh crore in FY 25 from ₹1.40 lakh crore in FY 24.
"At end-March 2025, the balance sheet of NBFCs continued to expand, driven by robust growth in loans and advances," the RBI said, adding that key indicators such as capital adequacy and asset quality "continued to remain at robust levels albeit some moderation in return on assets."
Overall asset quality of the NBFC sector improved during the year. The gross non-performing asset (GNPA) ratio declined to 2.9% at end-March 2025 from 3.5% a year earlier, while the net NPA (NNPA) ratio also eased, reflecting effective resolution of bad loans and adequate provisioning.
"The asset quality of the sector showed further improvement in 2024-25," the RBI said, noting that the improvement was broad-based across most NBFC categories. The share of standard assets in aggregate credit extended by NBFCs rose, alongside a decline in sub-standard and doubtful assets.
The microfinance segment, however, remained an outlier. NBFC-MFIs saw a sharp deterioration in asset quality, with the GNPA ratio rising to 4.1% at end-March 2025 from 2.0% a year earlier, while NNPA increased to 1.2% from 0.6%. The RBI attributed this to underlying stress in the segment and recovery challenges. At end-September 2025, GNPA and NNPA ratios of the NBFC sector remained unchanged from end-March levels.
Within larger NBFCs, asset quality trends were mixed. While the GNPA ratio of upper-layer NBFCs remained unchanged, NNPA worsened due to a decline in provisions.