1. Global Macroeconomic Scenario
As per the IMFs World Economic Outlook (WEO) published in April 2026, the global economy is projected to experience a deceleration in growth, with global GDP expanding by 3.4% in CY 2025 and moderating to 3.1% in CY 2026. This slowdown is attributed to heightened geopolitical disruptions, particularly the outbreak of war in the Middle East and associated disruptions to energy production and transit through the Strait of Hormuz, alongside persistent trade-related frictions and elevated uncertainty. While global growth in CY 2025 was supported by technology-led investment, accommodative financial conditions, and reduced tariff pressures, these tailwinds are expected to be partly offset in CY 2026 by higher commodity prices, tighter financial conditions, and weakening external demand.
Global headline inflation stood at 4.1% in CY 2025 and is projected to rise to 4.4% in CY 2026, reflecting the inflationary effects of the energy shock, second-round pricing pressures, and renewed risks of inflation expectations becoming less anchored. Rising oil and natural gas prices, coupled with supply-side disruptions, are expected to place upward pressure on energy-intensive goods, transportation, and food costs. At the same time, global trade growth is expected to remain subdued amid trade fragmentation, geopolitical tensions and supply chain realignments, despite continued resilience in technology-related trade flows.
In China, economic prospects remain constrained, with GDP growth at around 5.0% in CY 2025 and projected to remain subdued in CY 2026 at 4.4% reflecting continued weakness in the property sector, fragile domestic demand and pressures from shifting trade dynamics, although export performance and technology-linked sectors have provided some support. In Europe, growth conditions remain weak, with Germany facing stagnation amid industrial weakness, fiscal constraints, and trade disruptions while broader European growth remains vulnerable to energy-related shocks and geopolitical spillovers.
Meanwhile, India continues to demonstrate resilience, with real GDP growth at 7.6% in CY 2025 and the IMF projecting growth of 6.5% in CY 2026, supported by strong domestic demand, resilient rural consumption, sustained public infrastructure spending and continued investment momentum. Consumer price inflation is expected to remain broadly contained within the Reserve Bank of Indias target range, supporting macroeconomic stability and household purchasing power.
Overall, while growth in CY 2025 remained supported by resilience across major economies, the outlook for CY 2026 has weakened amid rising geopolitical risks, energy market disruptions, and persistent global uncertainty. Indias relative macroeconomic stability, strong domestic growth drivers, and ongoing investment cycle position it favourably amid global headwinds.
[Chart: Global Economy, Advanced Economies, Advanced Economies - Bar charts showing GDP growth trends]
F - Forecast, Source - IMF World Economic Outlook April 2026 Note: Advanced Economies and Emerging & Developing Economies are as per the classification of the World Economic Outlook (WEO). This classification is not based on strict criteria, economic or otherwise, and it has evolved over time. It comprises of 40 countries under the Advanced Economies including the 67 (the United States, Japan, Germany, France, Italy, the United Kingdom, and Canada) and selected countries from the Euro Zone (Germany, Italy, France etc.). The group of emerging market and developing economies (156) includes all those that are not classified as Advanced Economies (India, China, Brazil, Malaysia etc.)
1.3 GDP Growth Across Major Regions
Since the pandemic-induced slowdown in 2020, global economic growth has recovered at an uneven pace across regions, with emerging and developing economies continuing to outperform domestic economies. Emerging and Developing Asia led the recovery, supported by strong domestic demand, and is projected to see growth moderate from 5.5% in CY 2025 to 4.5% by CY 2031 due to weaker external demand, trade uncertainty, and slower growth in China, while India remains a key growth driver.
Emerging and Developing Europe has experienced a more gradual recovery and is expected to improve from 2.0% in CY 2025-26 to 2.3% by CY 2031, despite structural manufacturing weakness and geopolitical headwinds.
[Charts: Emerging and Developing Asia, Emerging and Developing Europe, Middle East and Central Asia, Sub-Saharan Africa]
Latin America and the Caribbean have steadily recovered from their sharp contraction in 2020, although growth is expected to remain modest, easing from 2.4% in CY 2025 to 2.6% by CY 2031, reflecting weak productivity, fiscal constraints, and subdued external demand.
In contrast, the Middle East and Central Asia are projected to witness significant volatility, with growth declining from 3.6% in CY 2025 to 1.9% in CY 2026, before rebounding to 4.6% in CY 2027 and moderating to 3.8% by CY 2031, largely driven by geopolitical tensions, energy market disruptions, and commodity price fluctuations.
Sub-Saharan Africa has also recovered steadily from the pandemic, with growth projected to improve from 4.5% in CY 2025 to 4.7% by CY 2031, supported by strengthening domestic demand and improving supply conditions despite high debt levels, structural constraints, and commodity price volatility. Overall, while all major regions have recovered from the disruptions of 2020, growth trajectories remain uneven. Emerging and developing economies are expected to maintain a relative growth advantage over advanced economies, although structural challenges, geopolitical uncertainties, and external demand conditions will continue to shape long-term economic performance.
The global economy in CY 2026 continues to show mixed performance, with growth diverging across regions due to varying economic conditions, inflation trends, and geopolitical developments. Although the global recovery had been supported by technology-led investment, easing financial conditions, and lower trade tensions, the outlook has weakened following the escalation of conflict in the Middle East, disruptions in energy markets, and heightened geopolitical uncertainty. Structural challenges, including tighter financial conditions, geopolitical fragmentation, and weak productivity growth, are expected to keep global growth below historical averages. Advanced economies are projected to grow by 1.8% in CY 2026, with the United States remaining relatively resilient while Europe continues to face weak industrial activity, subdued demand, and energy-related challenges.
Among emerging economies, China continues to experience slower growth due to persistent weakness in the property sector, subdued domestic demand, and changing trade dynamics, although exports and technology investment provide some support. In contrast, India is expected to remain one of the fastest-growing major economies, with GDP growth of 6.5% in CY 2026, driven by robust domestic demand, infrastructure investment, digitalisation, and structural reforms. Emerging and Developing Asia continues to outperform other regions despite moderating growth, while Latin America and the Caribbean maintain modest growth amid fiscal constraints and weak productivity. Sub-Saharan Africa is expected to strengthen gradually, whereas the Middle East and Central Asia face a more uncertain outlook due to geopolitical conflicts, energy market disruptions, and commodity price volatility.
Global inflation is projected to increase from 4.1% in CY 2025 to 4.4% in CY 2026, reflecting higher energy prices and supply-side disruptions, prompting central banks to adopt a cautious, data-dependent approach to monetary policy. Consequently, the pace of policy easing may be slower than previously anticipated. Looking ahead, global GDP growth is projected at 3.2% in CY 2027 and 3.1% by CY 2031, remaining below long-term historical averages. While advanced economies are expected to remain on a structurally slower growth path, emerging economies particularly India and broader Asia- will continue to drive global growth. Sustained economic momentum will depend on easing geopolitical tensions, stabilising energy markets, restoring trade flows, advancing structural reforms, and realising productivity gains from technological innovation, including artificial intelligence.
2.1. Gross Domestic Product (GDP)
According to the latest Provisional Estimates by MOSPI, GOI (05 June 26), Real GDP has been estimated to grow by 7.7% in FY 2025-26. Nominal GDP has witnessed a growth of 8.9%. Real GDP or GDP at Constant Prices is estimated to attain a level of INR 323.12 lakh crore in the FY 2025-26, against the First Revised Estimate (FRE) of GDP for the year 2024-25 of INR 299.89 lakh crore.
[Chart: Annual GDP Growth Estimates (Constant Prices)]
Note: FRE - First Revised Estimates; PE - Provisional Estimate Source: New Series of Gross Domestic Product (GDP) Estimates with Base Year 2022-23 by MOSPI, PIB Press Release dated 05 June 2026.
According to the International Monetary Fund (IMF) World Economic Outlook Database (April 2026), India is estimated to be the sixth-largest economy in the world in 2026, with a Gross Domestic Product (GDP) of approximately USD 4.15 trillion at current prices. Indias ranking reflects the latest national accounts data, including the revised GDP series released by the Government of India, which changed the base year from FY 2011-12 to FY 2022-23. Indias position in the global ranking is influenced by the revised GDP estimates and the depreciation of the Indian Rupee against the U.S. Dollar.
The economies ranked ahead of India are the United States (USD 32.38 trillion), China (USD 20.85 trillion), Germany (USD 5.45 trillion), Japan (USD 4.38 trillion), and the United Kingdom (USD 4.26 trillion).
2.2 Gross Value Added (GVA)
According to the Provisional Estimate of GDP for 2025-26 by MOSPI, Govt. of India (GoI), Real GVA is estimated at INR 294.91 lakh crore in the year 2025-26, against INR 273.36 lakh crore in FY 2024-25, registering a growth rate of 7.9% as compared to 7.3% growth rate in 2024-25. Nominal GVA is estimated to attain a level of INR 314.87 lakh crore during FY 2025-26, against INR 288.54 lakh crore in 2024-25, showing a growth rate of 9.1%.
[Chart: Advance GVA Growth Estimates (Constant Prices)]
Note: FRE - First Revised Estimates; PE - Provisional Estimate Source: New Series of Gross Domestic Product (GDP) Estimates with Base Year 2022-23 by MOSPI, PIB Press Release dated 05 June, 2026)
? Real GDP has been estimated to grow by 7.7% in FY 2025-26. Nominal GDP has witnessed a growth of 8.9%
? Real and Nominal GVA has been assessed to grow by 7.9% and 9.1% respectively in FY 2025-26.
? Secondary and Tertiary sector have boosted the performance of the economy by registering growths of 8.8% and 9.3% respectively at Constant prices.
? The Primary sector has observed 3.2% growth rate mainly driven by the performance of Agriculture and Fishery sectors.
? Manufacturing, Trade, Repair, Hotels, Transport, Communication & Services related to Broadcasting, Storage and Financial, Real Estate & Professional Services sectors have attained double-digit growth at both Constant and Current Prices in FY 2025-26.
? On the Expenditure-side, both the Private Final Consumption Expenditure (PFCE) and Gross Fixed Capital Formation (GFCF) have exhibited more than 7.5% growth rate in FY 2025-26.
? In the Q4 of FY 2025-26, Real GDP has been estimated to grow by 7.8% in FY 2025-26. Nominal GDP has observed a growth of 9.1%
? Real and Nominal GVA has been assessed to grow by 7.9% and 9.9% respectively in Q4 of FY 2025-26.
? Secondary and Tertiary sector have been the major driver for the Real and Nominal GVA growths of 7.9% and 9.9% respectively in Q4 of FY 2025-26.
? GFCF has recorded 10.8% growth rate and PFCE has witnessed 7.1% growth at Constant prices in the Fourth quarter of FY 2025-26.
Source: MOSPI, Press Release, 05 June 2026, Govt. of India (GoI).
Year-on-year inflation rate based on All India Consumer Price Index (CPI) with base year 2024 for the month of April 2026 over April 2025 is 3.48% (Provisional). Corresponding inflation rates for rural and urban are 3.74% and 3.16% respectively.
[Chart: CPI based Inflation and Food Inflation]
Per capita GDP growth for India is estimated at 9.57% CAGR between FY 2026-FY 2030. Increased individual incomes are expected to create additional discretionary spending, which may be beneficial for the sector.
[Chart: GDP Per Capita, Current Prices]
Note: E = Estimated, P = Projected Source: IMF Data Mapper, World Economic Outlook April 2026, India, GDP Per Capita
Private Final Consumption Expenditure (PFCE) represents the total spending by resident households on final consumption of goods and services, serving as a key indicator of consumer demand and overall economic wellbeing. It reflects the extent of household consumption and plays a crucial role in driving GDP growth. PFCE, at constant prices, accounted for 55.7% of GDP in FY2026 (same as FY2025). This marks a gradual moderation from 56.4% in FY2024 and 57.1% in FY2023, indicating a relative shift in the composition of economic growth. The decline is primarily attributable to higher changes in stocks (inventory build-up), which increased the share of investment components in GDP, even as household consumption continues to remain a key driver of the economy.
2.6 Overview on Key Demographic Parameters
2.6.1 Population growth
Indias economic trajectory and consumption dynamics are closely tied to its demographic shifts. Indias population expanded from approximately 0.75 billion in 1984 to 1.47 billion in 2025 and is further reached around 1.48 billion in 2026, consolidating its position as the worlds most populous nation. This sustained growth underlines the emergence of a vast labour force and consumer base, which is essential for driving long-term economic growth, supporting rising consumption demand, and strengthening the countrys overall economic potential.
[Chart: Trend of India Population]
Source: World Bank Database Population Data 2026 - Worldometer, IMF, Infometrics Analytics & Research.
Indias labour force has experienced steady growth over the past decade. In 2010, the total labour force was approximately 467.56 million. By 2025, this number had increased to 617.63 million.
This upward trend underscores the expanding working-age population, improving labour force participation, and gradual recovery in employment post the pandemic period. The sharp increase observed after 2020 highlights the rebound in economic activity and rising workforce engagement across sectors. However, it also emphasizes the need for sustained job creation to effectively absorb the growing labour pool.
The labour force participation rate (LFPR) has also witnessed variations over time due to changing socioeconomic conditions, including urbanization, education levels, and sectoral employment shifts.
These trends highlight the importance of implementing policies that not only generate employment opportunities but also improve job quality, productivity, and inclusivity across key sectors of the economy.
[Chart: Total Labour Force (CY 2010 - CY 2025)]
Source: World Bank Database
Gross National Disposable Income (GNDI) represents the total income available to a nations residents for consumption and saving after accounting for income transfers with the rest of the world. Per Capita GNDI has exhibited a steady upward trend over the recent years, increasing from approximately INR1,912,108 in FY23 to INR 2,117,076 in FY24 and further to INR 2,491,195 in FY26 (PE). It reflects the continued growth in income available to households and businesses, supporting consumption and savings activities within the economy.
The rise in disposable income has been accompanied by higher consumer spending, as reflected in the growth of Private Final Consumption Expenditure (PFCE), which measures the total value of goods and services consumed by households. Per Capita PFCE increased from approximately INR 1,07,910 in FY23 to INR 1,38,324 in FY26 (PE). The approximately 8.0% growth in FY26 over FY25 indicates sustained consumer demand and continued expansion in household consumption expenditure, supported by rising incomes and economic activity.
[Chart: Trend of Per Capita GNDI and Per Capita PFCE (Current Price)]
Note: Data mentioned is in INR, FEE - First Revised Estimates, PE - Provisional Estimates. Source: PIB, New Series of Gross Domestic Product (GDP) release date on 5th June 2026. Estimates with Base Year 2022-23
[Chart: Trend in Household Financial Savings and Liabilities (% of GDP)]
*Preliminary estimates as per RBI Bulletin, August 2025, Occasional Series Table 50(a) Source: MoSPI and RBI. The data presented is based on the latest information currently available from the RBI & MoSPI.
15.40% of GDP in FY2020-21 to 10.80% in FY2024-25 (P), while household financial liabilities have exhibited a rising trend, reflecting increased credit uptake by households. The elevated savings levels in FY2020-21 were largely driven by precautionary savings during the pandemic; however, with normalization of economic activity, savings have stabilized at lower levels. At the same time, the household liabilities-to-GDP ratio increased from 3.7% in FY2020-21, peaking at approximately 6.2% in FY2023-24 before moderating to around 4.7% in FY2024-25 (P).
These trends have significant implications for the banking sector. Moderating household savings may lead to slower deposit growth, higher competition for deposits, and increased pressure on banks cost of funds and Net Interest Margins (NIMs). Lower savings may also reduce the share of stable CASA deposits, increasing reliance on term deposits and wholesale funding. Meanwhile, rising household liabilities are supporting growth in retail lending segments such as housing and personal loans, driving banks credit expansion and interest income. However, the gap between rising credit demand and relatively slower deposit growth could result in higher credit-deposit ratios, tighter liquidity conditions, and potential asset quality risks, particularly in unsecured lending segments.
The Union Budget FY2026-27, presented by Finance Minister Nirmala Sitharaman, introduces a comprehensive set of measures aimed at stimulating economic growth, enhancing infrastructure, and fostering inclusive development. With a focus on sectors such as agriculture, MSMEs, infrastructure, innovation, and exports, the budget seeks to create a conducive environment for sustained economic expansion.
In FY2026-27, the Union Budget has increased the public capex towards to INR 12.2 lakh crore from the previous INR 11.21 lakh crore (3.1% of GDP) which was earmarked in FY2025-26. To strengthen the confidence of private developers regarding risks during infrastructure development and construction phase, the budget proposed to set up an Infrastructure Risk Guarantee Fund to provide prudently calibrated partial credit guarantees to lenders.
Recognizing the pivotal role of Micro, Small, and Medium Enterprises (MSMEs) in Indias economic landscape, the budget introduced a three-pronged approach to support the sector. The budget introduced a dedicated INR 10,000 crore SME Growth Fund as well as proposed to top up the Self-Reliant India Fund set up in 2021, with INR 2,000 crore to continue support to micro enterprises and maintain their access to risk capital. With TREDS, more than INR 7 lakh crore has been made available to MSMEs. To leverage its full potential, the budget further proposed four measures: (i) mandate TREDS as the transaction settlement platform for all purchases from MSMEs by CPSEs, serving as a benchmark for other corporates; (ii) introduce a credit guarantee support mechanism through CGTMSE for invoice discounting on TREDS platform; (iii) link GeM with TREDS for sharing information with financiers about government purchases from MSMEs, encouraging cheaper and quicker financing; (iv) introduce TREDS receivables as asset-backed securities, helping develop a secondary market, enhancing liquidity and settlement of transactions. Moreover, Government will facilitate Professional Institutions such as ICAI, ICSI, ICMAI to design short-term, modular courses and practical tools to develop a cadre of Corporate Mitras, especially in Tier-II and Tier-III towns, which will help MSMEs meet compliance requirements at affordable costs.
A Scheme for Rare Earth Permanent Magnets was launched in November 2025. In line with that, the budget proposed supporting the mineral-rich States of Odisha, Kerala, Andhra Pradesh and Tamil Nadu in establishing dedicated Rare Earth Corridors to promote mining, processing, research and manufacturing.
The following Schemes have been announced: a) The National Fibre Scheme for self-reliance in natural fibres such as silk, wool and jute, man-made fibres, and new-age fibres. b) Textile Expansion and Employment Scheme to modernise traditional clusters with capital support for machinery, technology upgradation and common testing and certification centres. c) A National Handloom and Handicraft programme to integrate and strengthen existing schemes and ensure targeted support for weavers and artisans. d) Tex-Eco Initiative to promote globally competitive and sustainable textiles and apparels. e) Samarth 2.0 to modernize and upgrade the textile skilling ecosystem through collaboration with industry and academic institutions.
Aligning with the roadmap launched in December 2025, CCUS technologies at scale will achieve higher readiness levels in end-use applications across five industrial sectors, including, power, steel, cement, refineries and chemicals. An outlay of INR 20,000 crore is proposed over the next 5 years.
To encourage the issuance of higher-value municipal bonds by large cities, the budget proposed an incentive of INR 100 crore for a single bond issuance of more than INR 1000 crore. The current scheme under AMRU, which incentivises issuances up to INR 200 crore, will also continue to support smaller and medium towns.
Individual Persons Resident Outside India (PROI) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme. It is also proposed to increase the investment limit for an individual PROI under this scheme from 5% to 10%, with an overall investment limit for all individual PROIs to 24%, from the current 10%.
To promote India as a hub for medical tourism services, the budget proposed to launch a Scheme to support States in establishing five Regional Medical Hubs, in partnership with the private sector. These Hubs will serve as integrated healthcare complexes that combine medical, educational and research facilities. They will have AYUSH Centres, Medical Value Tourism Facilitation Centres and infrastructure for diagnostics, post-care and rehabilitation. These Hubs will provide diverse job opportunities for health professionals including doctors and AHPs.
To diversify farm outputs, increase productivity, enhance farmers incomes, and create new employment opportunities, the budget announced support schemes related to high value crops such as coconut, sandalwood, cocoa and cashew in coastal areas. Agar trees in Northeast and nuts such as, almonds, walnuts and pine nuts in hilly regions will also be supported. India is the worlds largest producer of coconuts.
About 30 million people, including nearly 10 million farmers, depend on coconuts for their livelihood. To further enhance competitiveness in coconut production, the Budget proposed a Coconut Promotion Scheme to increase production and enhance productivity through various interventions including replacing old and non-productive trees with new saplings/plants/varieties in major coconut growing States. A dedicated programme is proposed for Indian cashew and cocoa to make India self-reliant in raw cashew and cocoa production and processing, enhance export competitiveness and transform Indian Cashew and Indian Cocoa into premium global brands by 2030.
Further, the Central Government will partner with State Governments to promote focused cultivation and post-harvest processing to restore the glory of the Indian Sandalwood ecosystem. To rejuvenate old, low-yielding orchards and expand high-density cultivation of walnuts, almonds and pine nuts, the budget announced to support a dedicated programme to enhance farmer incomes and in bringing value addition by engaging youth.
The Union Budget FY 2026-27 presents a balanced approach to economic growth by addressing immediate consumption needs and laying the foundation for long-term sustainability. Through targeted investments in infrastructure, support for MSMEs, and sector-specific initiatives, the budget aims to foster an inclusive and resilient economy. These measures are expected to create new opportunities for financial institutions, as the growing demand for investment products will provide avenues for expansion and innovation in the financial services sector.
The major headwinds to global economic growth remain significant, including escalating geopolitical tensions, volatility in global energy and commodity markets, persistent inflationary pressures, tighter financial conditions, geoeconomic fragmentation, rising public debt, climate-related disruptions, and uncertainty surrounding the pace and impact of technological transformation. In particular, the ongoing Middle East conflict and associated risks to energy supply chains have heightened downside risks to the global outlook, while weaker trade momentum and structural productivity challenges continue to weigh on medium-term growth prospects.
Despite these challenges, Indias economy remains relatively well-positioned compared to other major emerging markets. According to the IMFs April 2026 WEO, Indias GDP growth is projected at 6.5% in CY 2026, maintaining its position as one of the fastest-growing major economies globally and significantly above the global growth
9 NBFC- Account Aggregator Collection and sharing of customer financial Base Layer (NBFC- AA) information in a consolidated manner 10 NBFC- Peer to Peer Lending Online lending marketplace connecting borrowers Base Layer Platform (NBFC- P2P) and lenders 11 Housing Finance Company Housing finance for purchase, construction, repair, Middle or Upper Layer (HFC) and renovation of residential units 12 Standalone Primary Dealer Underwriting and participation in government Middle Layer (SPD) securities market
Source - RBI, Trends and Progress of Banking report (2024-25)
projection of 3.1%. Key positive factors supporting Indias growth include resilient domestic demand, sustained public infrastructure spending, a strengthening investment cycle, expanding digital infrastructure, and continued progress in structural reforms. Inflation, as measured by the Consumer Price Index (CPI), remained contained at 3.4% in March 2026 under the revised base year, supporting household purchasing power, although rising global oil prices and supply disruptions may pose upside risks.
Indias strategic position as a manufacturing and investment destination continues to strengthen, supported by government initiatives, supply chain diversification trends, a skilled labour force, and a dynamic innovation ecosystem. Public investment is expected to remain a critical growth driver, with the Union Budget FY 2026-27 increasing capital expenditure to INR 12.21 lakh crore from INR 11.21 lakh crore in the previous year, reinforcing the governments investment-led growth strategy. In addition, the proposed Infrastructure Risk Guarantee Fund is aimed at improving private sector participation in infrastructure by mitigating project-related risks, which is expected to crowd in private investment, enhance infrastructure capacity, and support long-term productivity growth.
Private sector investment intentions are also expected to strengthen alongside public capex, while rising disposable incomes, improving rural demand, and continued policy support are likely to reinforce consumption momentum. Strengthening supply chains, expanding infrastructure capacity, and sustaining inflation stability will be critical in supporting resilience against external shocks. These factors are expected to support Indias medium-term growth momentum and strengthen its ability to navigate global uncertainties.
Looking ahead, India is expected to remain favourably positioned even as the global economy transitions to a structurally lower growth path, with the IMF projecting global growth at 3.2% in CY 2027 and 3.1% by CY 2031. While risks from geopolitical instability, trade disruptions, and tighter financial conditions persist, Indias relative macroeconomic stability, demographic advantage, reform momentum, and ongoing investment cycle place it in a strong position to sustain growth and reinforce its role as a key contributor to global economic expansion over the medium term.
Non-banking financial institutions (NBFSs) are an important component of Indias financial system and play a significant role in complementing the banking sector by extending credit to diverse sectors and underserved customer segments. The sector includes non-banking financial companies (NBFCs), housing finance companies (HFCs), all India financial institutions (AIFs), and standalone primary dealers (SPDs), regulated primarily by the Reserve Bank of India.
NBFCs have emerged as key drivers of financial inclusion by providing credit to small businesses, microfinance borrowers, rural and semi-urban customers, and other segments with limited access to formal banking channels. HFCs focus on housing finance and related lending activities, while AIFs provide long-term financing to sectors such as agriculture, MSMEs, infrastructure, trade, and housing. SPDs act as underwriters and market makers in the Government securities market.
The NBFC sector continued to witness balance sheet expansion, supported by growth in loans and advances, while maintaining healthy capital adequacy and asset quality levels. The regulatory framework for the sector has also continued to strengthen through scale-based regulations, digital lending guidelines, and measures aimed at improving governance, transparency, and customer protection.
3.1. Classification of NBFCs by Activity under the Scale-Based Regulatory Framework
| S. No. | Classification | Key Activity | Regulatory Layer |
| 1 | NBFC-Investment and Credit Company (NBFC-ICC) | Lending activities supporting productive/economic activities, consumer finance, personal loans, and acquisition of securities for investment | Any layer, depending on SBR parameters |
| 2 | NBFC-Infrastructure Finance Company (NBFC-IFC) | Infrastructure Loans | Middle or Upper Layer |
| 3 | Core Investment Company (CIC) | Investment in equity shares, preference shares, debt, or loans to group companies | Middle or Upper Layer |
| 4 | NBFC-Infrastructure Debt Fund (NBFC-IDF) | Refinancing operational infrastructure projects and financing infrastructure assets | Middle Layer |
| 5 | NBFC-Micro Finance Institution (NBFC-MFI) | Providing collateral-free small-ticket loans to economically disadvantaged groups | Any layer, depending on SBR parameters |
| 6 | NBFC-Factors | Acquisition of receivables and factoring activities | Any layer, depending on SBR parameters |
| 7 | NBFC-Non-Operative Financial Holding Company (NBFC-NOFHIC) | Facilitating promoter/promoter group participation in setting up new banks | Base Layer |
| 8 | Mortgage Guarantee Company (MGC) | Undertaking mortgage guarantee business | Any layer, depending on SBR parameters |
| Non-Banking Financials Companies (9,382) | All India Financial Institutions (5) | Asset reconstruction Companies (27) |
| Top Layer (0) Ideally will remain empty, unless the Reserve Bank recognises a substantial increase in the potential systemic risk from certain upper layer NBFC. | ||
| Upper Layer (15) NBFCs (including HFCs) identified by the Reserve Bank. The top ten eligible NBFCs in terms of their asset size always reside in the upper layer, irrespective of any other factors. | ||
| Middle layer (656) NBFC-D, NBFC-ND with assets \u2265 1,000 crore, SPDs, IDFs. | ||
| Base Layer (8,711) NBFC-ND with assets < 1,000 crore, P2Ps, AAs, NOFHCs, NBFCs not availing public funds and not having any customer interface. |
Notes: 1 Figures in parentheses indicate the number of institutions (provisional). 2 NBFCs, viz. NBFC-ICC, NBFC-MFI, NBFC Factor, and NBFC-MGC could lie in any of the layers depending on the parameters specified under SBR. NBFC-CIC, HFC, and IFC could lie either in the upper or middle layer. 3 Government-owned NBFCs are placed either in the base or the middle layer. Sources: RBI and NBH, Trends and Progress of Banking (2024-25). Sources: RBI and NBH.
3.3 Composition of NBFCs
| Layer | Number (%) | Assets (%) |
| NBFC-UL | 0.20 | 30.2 |
| NBFC-ML | 7.00 | 64.6 |
| NBFC-BL | 92.80 | 5.2 |
| Total | 100.00 | 100 |
Note: NBFCs refer to all NBFCs regulated by the Reserve Bank, including CICs, HFCs and SPDs. Sources: RBI and NBH, Trends and Progress of Banking (2024-25)
The non-banking financial companies (NBFCs) sector in India comprises government-owned and non-government entities engaged in various lending and financing activities. NBFCs are categorised into upper layer (NBFC-UL) and middle layer (NBFC-ML) entities based on their size and systemic importance. The distribution of asset size across government companies, public limited companies, and private limited companies reflects the operational scale and composition of the NBFC sector in India.
3.5 Ownership Pattern of NBFCs (At end-March 2025)
| Type | NBFC-Sector Number | NBFC-Sector Asset Size | NBFC-Sector Asset share | NBFC-UL Number | NBFC-UL Asset Size | NBFC-UL Asset share | NBFC-ML Number | NBFC-ML Asset Size | NBFC-ML Asset share | |
| A | Government Companies | 26 | 22,28,097 | 36.5 | 0 | 0 | 0 | 26 | 22,28,097 | 51.5 |
| B | Non-government Companies (1+2) | 405 | 38,81,029 | 63.5 | 10 | 17,81,991 | 100.0 | 395 | 20,99,038 | 48.5 |
| 1. | Public Limited Companies | 56 | 18,67,476 | 30.6 | 7 | 13,43,366 | 75.4 | 49 | 5,24,110 | 12.1 |
| 2. | Private Limited Companies | 349 | 20,13,553 | 33.0 | 3 | 4,38,625 | 24.6 | 346 | 15,74,929 | 36.4 |
| C | Total (A+B) | 431 | 61,09,126 | 100.0 | 10 | 17,81,991 | 100.0 | 421 | 43,27,135 | 100.0 |
Notes:
1. Data are provisional.
2. Figures may not add up due to rounding-off. Source: Supervisory Returns, RBI, Trends and Progress of Banking (2024-25).
The NBFC sector comprises government-owned and non-government companies across upper layer (NBFC-UL) and middle layer (NBFC-ML) categories. Government companies accounted for asset size of INR 22,28,097 crore, entirely classified under NBFC-ML. Among non-government entities, public limited companies accounted for asset size of INR 18,67,476 crore, with a significant share of INR 13,43,366 crore under NBFC-UL, indicating the presence of large systemically important NBFCs. Private limited companies accounted for asset size of INR 20,13,553 crore, primarily concentrated in the NBFC-ML category at INR 15,74,929 crore.
Overall, the data reflects the significant contribution of non-government NBFCs towards the sectors overall asset base and lending activities.
? Balance Sheet Composition of NBFCs
[Chart: Growth in Total Liabilities/Total Assets]
Source: Supervisory returns, RBI, Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBI. The subsequent update is expected to be released in December 2026.
The total liabilities/assets of the NBFC sector witnessed strong and consistent growth during the period under review, increasing from INR 43,88,930 crore in 2023 to INR 51,39,470 crore in 2024 and further to INR 61,09,126 crore in 2025. The sector continued its expansion momentum during the first half of FY2026, with total liabilities/assets reaching INR 65,51,157 crore as of September 2025.
The sustained increase in the balance sheet size of NBFCs reflects robust growth in credit demand across retail, MSME, infrastructure, and consumer lending segments. The growth was further supported by increasing digitalisation of lending operations, rising financial inclusion, expansion in retail credit penetration, and improved access to funding sources including bank borrowings, debentures, and market-linked instruments.
Overall, the data highlights the increasing scale and systemic importance of the NBFC sector within Indias financial ecosystem, supported by strong lending growth and expanding participation in formal credit delivery.
[Chart: Group - Wise Balance Sheet Composition of NBFCs Share of Total Assets/Liabilities (In %)]
Source: Supervisory returns, RBI, Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBI. The subsequent update is expected to be released in December 2026.
The balance sheet composition of the NBFC group reflects a stable borrowing-led funding structure, with borrowings constituting the largest share of liabilities during the period under review. Borrowings accounted for 67.88% in FY2023 and increased marginally to 68.68% in Sep-25, indicating the sectors continued dependence on external funding sources such as bank borrowings, debentures, and other market-linked instruments. In contrast, public deposits remained minimal and largely stable at 1.94% in FY2023 and 2.01% in Sep-25, highlighting the limited reliance of NBFCs on deposit-based funding and their greater dependence on institutional and wholesale funding channels.
On the asset side, loans and advances formed the dominant component, increasing from 77.78% in FY2023 to 79.46% in Sep-25, reflecting sustained growth in lending activities and expansion in credit deployment across retail and commercial segments. Investments accounted for 12.15% in FY2023 and 12.50% in Sep-25, indicating a relatively stable allocation towards investment portfolios and liquidity management.
Overall, the composition highlights a stable and lending-focused NBFC sector, characterised by strong dependence on borrowings for funding and a high concentration of assets in loans and advances. The trend reflects the sectors continued focus on core financing activities, supported by diversified borrowing sources and prudent asset allocation strategies.
3.7 Public Deposits
[Chart: Growth in Public Deposits]
Source: RBI supervisory returns, Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBI. The subsequent update is expected to be released in December 2026.
Public deposits mobilised by non-banking financial companies (NBFCs) witnessed consistent growth during the period under review, reflecting increasing deposit confidence and expansion in funding sources within the sector.
Public deposits increased from INR 84,975 crore in 2023 to INR 102,959 crore in 2024 and further to INR 12178 crore in 2025. The upward trend continued during the first half of FY2026, with public deposits reaching INR 131730 crore as of September 2025. The continuous increase in deposits indicates growing participation of depositors and strengthening funding base of NBFCs to support expansion in lending and financing activities.
Overall, the rising trend in public deposits reflects improving financial stability and increasing role of NBFCs in mobilising funds within the financial system.
3.8 Growth in Total Borrowings
[Chart: Secured Borrowings, Unsecured Borrowings, Total Borrowings]
[Chart: Break-up of Secured and Unsecured Borrowings of the NBFC Group]
Source: Supervisory returns, RBI, Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBI. The subsequent update is expected to be released in December 2026.
The break-up of secured and unsecured borrowings of the NBFC sector as of September 2025 indicates a diversified funding structure, with a balanced mix of secured and unsecured liabilities supporting a steadily expanding borrowing base. Secured borrowings constituted approximately 58.45% of total borrowings, while unsecured borrowings accounted for 41.55%, reflecting a prudent yet flexible funding strategy. The total borrowings of the sector have demonstrated consistent growth, increasing from approximately INR 29,79,316 crore in 2023 to INR 44,99,426 crore as of September 2025, driven by sustained access to funding sources and supporting continued credit expansion.
Within secured borrowings, borrowings from banks constituted the largest share at 49.12%, followed by debentures at 33.86%, reflecting the sectors strong dependence on institutional funding and secured debt instruments. Other borrowings accounted for 11.94%, while borrowings from financial institutions (Fis) contributed 4.48% and interest accrued represented a marginal 0.61%.
In the case of unsecured borrowings, debentures formed the largest component at 39.04%, indicating increased usage of market-linked debt instruments for raising funds. This was followed by other borrowings at 21.38% and borrowings from banks at 19.67%. Inter-corporate borrowings and commercial papers contributed 8.53% and 8.36%, respectively, reflecting diversified short-term and corporate funding sources. Borrowings from Fis remained relatively low at 1.45%, while borrowings from relatives and interest accrued accounted for only 0.18% and 1.39%, respectively.
Overall, the borrowing mix highlights the NBFC sectors well-diversified and evolving liability profile, characterized by a stable proportion of secured borrowings complemented by a meaningful share of unsecured funding. This structure provides financial flexibility, optimizes cost of funds, and enhances resilience, enabling NBFCs to efficiently support sustained credit growth across segments.
[Charts: Growth in Total Investments, Growth in Total Investments and Composition]
Source: Supervisory returns, RBL Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBL. The subsequent update is expected to be released in December 2026.
The investment portfolio has witnessed steady growth over the recent periods, increasing from approximately INR 5,334,421 crore in 2023 to INR 8,18,990 crore as of September 2025, reflecting a consistent expansion in investment activities and strengthening balance sheet position. This upward trend indicates increasing deployment of funds into financial assets, supported by improved liquidity and capital availability.
The composition of investments as of September 2025 reflects a diversified allocation across asset classes, with a dominant exposure to equity shares (47.18%), indicating a relatively higher focus on growth-oriented instruments. This is complemented by a significant allocation to government securities (20.93%), which provide stability and reflect a risk-mitigated investment approach. Investments in mutual funds (13.45%) and debentures & bonds (7.27%) further contribute to a balanced mix of liquidity and fixed-income returns.
Relatively smaller allocations to other investments (9.37%), preference shares (12%), and commercial papers (0.68%) indicate limited exposure to niche and short-term instruments. Overall, the investment profile demonstrates a balanced strategy combining growth, income, and safety, enabling portfolio diversification while supporting stable returns.
[Charts: Loans & Advances, Break-up of Total Loans and Advances - Sep25]
Source: Supervisory returns, RBL Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBL. The subsequent update is expected to be released in December 2026.
The NBFC sector has demonstrated strong and sustained growth in its loans and advances portfolio, which expanded from INR 34,13,804 crore in 2023 to INR 52,05,544 crore as of September 2025 reflecting robust credit demand and the sectors increasing role in financing economic activity. The asset mix remains largely skewed towards secured lending, constituting approximately 76.65% of total loans and advances, with the remaining 24.35% comprising unsecured loans. This composition indicates a prudent and balanced risk approach, wherein NBFCs prioritize asset-backed lending to ensure stability while maintaining selective exposure to unsecured segments to enhance yield.
Overall, the growth in the loan book, coupled with a conservative portfolio structure, underscores the sectors resilience, disciplined risk management practices, and its critical contribution to financial inclusion and credit intermediation.
The distribution of credit by non-banking financial companies (NBFCs) and banks reflects the varying sectoral focus and lending priorities across different segments of the economy during the period under review.
[Chart: Sectoral Distribution of NBFC Credit Portfolio (Sep 25)]
Note: Data are provisional. Source: Supervisory Returns, RBL Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBL. The subsequent update is expected to be released in December 2026.
The sectoral distribution of NBFC credit as of September 2025 highlights a clear concentration of lending towards the industrial and retail segments, which together account for a significant majority of the portfolio. Industry alone constitutes the largest share at 45.99%, indicating strong NBFC participation in supporting business and infrastructure-related financing needs. This is followed by retail loans at 35.33%, reflecting the sectors growing focus on consumer financing and financial inclusion. The services sector accounts for 15.40%, suggesting moderate exposure, while agriculture and allied activities (1.69%) and other segments (1.60%) represent relatively small portions of the overall portfolio. Overall, the distribution underscores NBFCs strategic emphasis on higher-demand and scalable segments such as industry and retail, while maintaining limited exposure to traditionally riskier or less scalable sectors.
[Chart: Sector-wise Growth in Credit Deployment by NBFCs and Banks (%)]
Note: Data are provisional. Source: Supervisory Returns, RBL Trends and Progress of Banking (2024-25). The data presented is based on the latest information currently available from the RBL. The subsequent update is expected to be released in December 2026.
Credit extended by NBFCs towards the industrial sector increased from 17.9% in March 2024 to 18.3% in March 2025, indicating stable growth in financing activities towards industrial and business-related segments. In comparison, bank credit to the industrial sector moderated from 8.5% in March 2024 to 8.2% in March 2025, reflecting relatively slower growth in industrial lending by banks.
Retail loans constituted a significant portion of NBFC lending; however, growth moderated from 31.1% in March 2024 to 18.1% in March 2025. Similarly, bank credit growth towards retail loans declined from 27.5% to 11.7% during the same period, indicating moderation in retail credit expansion across the financial sector.
Credit growth towards the services sector by NBFCs increased significantly from 21.1% in March 2024 to 29.8% in March 2025, reflecting increased lending towards service-oriented businesses and commercial activities. Bank credit to the services sectors also remained positive, although growth moderated from 23.5% in March 2024 to 12.0% in March 2025.
In the agriculture and allied activities segment, NBFC credit growth declined from 38.7% in March 2024 to (-3.1%) in March 2025, indicating contraction in lending growth towards the sector during the period under review. In comparison, bank credit growth towards agriculture and allied activities moderated from 20.0% to 10.4% during the same period, reflecting slower credit expansion towards the agricultural sector.
Overall, the data indicates that NBFCs continued to maintain strong presence in retail and services lending, while sectoral credit growth trends moderated across certain segments during March 2025. Banks, on the other hand, continued to witness comparatively moderate credit growth across key sectors of the economy.
The credit to GDP ratio of non-banking financial companies (NBFCs) and scheduled commercial banks (SCBs) is an important indicator used to assess the extent of credit penetration and the contribution of financial institutions towards economic activity. An increasing credit to GDP ratio generally reflects expansion in lending activities, improved access to formal credit and deepening financial intermediation within the economy.
The NBFCs credit to GDP ratio increased from 12.3 in 2020 to 13.6 in 2021, moderated to 12.3 in 2022, and subsequently improved to 12.6 in 2023, 13.6 in 2024, and 14.6 in 2025. The overall increase reflects the growing role of NBFCs in extending credit to retail borrowers, MSMEs, and underserved segments of the economy.
Similarly, the SCBs credit to GDP ratio increased from 51.3 in 2020 to 54.6 in 2021, moderated during 2022 and 2023, and thereafter increased to 55.5 in 2024 and 57.8 in 2025. The rising trend indicates strengthening credit growth by the banking sector and improving financial intermediation within the economy.
[Chart: Borrower Risk Profile Distribution Across Lender Categories (Dec 2025)]
Note - All Commercial Fund based loans (WC-TL). Exposure up to 100Cr considered; Low Risk CMR 1-3, Medium Risk CMR 4-7 and High Risk CMR 8-10 Source: TransUnion CIBIL commercial & consumer credit database, MSME Pulse DEC 2025 report.
The borrower risk profile for commercial loans across lender categories as of December 2025 reflects distinct lending strategies and risk appetites among public sector banks (PSBs), private banks, and NBFCs. Private banks exhibit the most conservative risk profile, with a dominant 66% share of low-risk borrowers, and relatively limited exposure to medium-risk (27%) and high-risk (7%) categories, indicating a strong focus on high credit-quality borrowers.
In comparison, PSBs maintain a more balanced distribution, with 41% low-risk, 39% medium-risk, and 20% high-risk borrowers, reflecting broader participation across borrower risk segments. NBFCs, while also maintaining a majority of low-risk borrowers at 59%, show relatively higher exposure to medium-risk (29%) and high-risk (12%) segments compared to private banks. This indicates a more flexible and inclusive credit approach, with NBFCs playing a critical role in catering to underserved and emerging borrower segments.
Additionally, the observed increase in the share of low-risk borrowers across categories, particularly within NBFCs, reflects ongoing improvement in portfolio quality and underwriting standards.
Overall, the distribution underscores the complementary role of NBFCs alongside banks in expanding credit access while maintaining a balanced risk profile across the financial system.
[Chart: Credit Growth (Sep-25)]
Sources: CRIF High Mark; and RBI staff estimates, Financial Stability Report Dec 2025. The data presented is based on the latest information currently available from the RBI. The subsequent update is expected to be released in December 2026.
Fintech firms continued to witness higher growth in unsecured lending compared to other NBFCs during September 2025, reflecting increasing adoption of digital lending models and technology-driven credit delivery mechanisms.
Year-on-year growth in personal loans for fintech firms stood at 50.0% significantly higher than 12.3% recorded for other NBFCs. Similarly, overall credit growth for fintech firms was recorded at 36.1% as compared to 23.6% for other NBFCs.
The higher credit growth among fintech firms indicates increasing penetration of digitally originated unsecured loans, particularly within personal lending segments. The trend also reflects the growing role of fintech-led NBFCs in expanding retail credit access, supported by digital onboarding, automated underwriting processes, and faster loan disbursement capabilities.
3.12 Impairment in Unsecured Loans Declining
[Charts: Personal Loans - Overall, Personal Loans Based on Ticket Size (Sep - 25)]
Sources: CRIF High Mark; and RBI staff estimates
Impairment levels in unsecured personal loans moderated during September 2025 across fintech firms and other NBFCs, indicating improvement in asset quality within the unsecured lending segment.
Impairment levels for fintech firms declined from 2.4% in September 2024 to 1.9% in September 2025, while impairment levels for other NBFCs declined from 2.0% to 1.7% during the same period.
Based on ticket size, smaller-ticket loans continued to record relatively higher impairment levels compared to larger-ticket loans. For loans up to $50,000, impairment levels stood at 3.3% for fintech firms and 2.8% for other NBFCs, whereas loans above $1 lakh recorded lower impairment levels of 1.3%, respectively.
The trend indicates improving credit quality and stabilising repayment behavior across the unsecured lending ecosystem, while smaller-ticket personal loans continue to exhibit relatively higher credit risk.
Financial inclusion remains a key priority for fostering inclusive and sustainable economic growth in India. Policy initiatives undertaken by the Reserve Bank of India, along with government-led programs and technology-driven innovations, have significantly improved access to formal financial services. India has adopted a physical approach, combining digitalisation with expansion of physical banking infrastructure such as branches and ATMs, thereby ensuring wider reach across rural and semi-urban areas. While bank branch penetration in India is relatively higher than in most emerging market and developing economies (EMDEs), ATM penetration on a per capita basis remains comparatively lower.
[Chart: Financial Inclusion Index]
Note: The index value ranges between zero and 100, where zero indicates complete financial exclusion and 100 indicates full financial inclusion. Source: RBI - Report on Trend & Progress of Banking in India 2024-25.
The Financial Inclusion Index demonstrates a consistent and impressive upward trajectory from its base value of 53.9 in 2021 to 67.0 in 2025, reflecting a robust 24.3% increase over the period and underscoring the transformative impact of Indias comprehensive financial inclusion strategy. This steady progression, with annual improvements across 2022 (56.4), 2023 (60.1), and 2024 (64.2), highlights broad-based gains in all three sub-indices- Access, Usage, and Quality- driven by enhanced availability of banking services, greater adoption of digital payments, insurance, pensions, and strengthened financial literacy initiatives. The rise to 67.0 for the year ended March 2025, affirms the effectiveness of flagship programs such as Pradhan Mantri Jan Dhan Yojana, with over 55.98 crore beneficiaries, alongside record momentum in UPI transactions, Kisan Credit Cards, and saturation campaigns. This sustained momentum not only bridges access gaps for underserved populations but also empowers entrepreneurship, risk management, and economic productivity, reinforcing Indias commitment to inclusive, equitable, and sustainable growth for every citizen.
Indias payment systems have witnessed significant transformation over the years, supported by expansion in payment infrastructure, technological advancements, increasing internet and smartphone penetration, and policy initiatives promoting digital financial services. Payment systems continue to play an important role in supporting economic activity, improving transaction efficiency, and fostering financial inclusion across the country. Regulatory initiatives undertaken by the Reserve Bank of India have focused on developing safe, secure, accessible, and affordable payment mechanisms to strengthen the digital financial ecosystem.
Digital payments have witnessed substantial growth in both value and transaction volume, driven by the increasing adoption of digital payment platforms and cashless payment methods. During 2024-25, digital payments accounted for 97.6% of Indias total payments in value terms, while paper-based instruments such as cheques represented only 2.4% of total payments. Further, digital payments recorded strong growth in volume terms, supported by increasing usage of digital payment methods for small-value retail transactions. The decline in the average value of retail digital payments during the year indicates wider adoption of digital payment platforms for day-to-day transactions and growing penetration of digital financial services across customer segments.
The consumer lending industry in India is influenced by various political, economic, social, technological, legal, and environmental (PESTEL) factors. Increasing financial inclusion, growth in digital payments infrastructure, rising retail credit demand, and technological advancements in digital lending continue to support industry growth. Further, evolving regulatory frameworks, cybersecurity requirements, and governance standards issued by the Reserve Bank of India continue to shape the operating environment for lenders. The table below summarizes the key PESTEL factors and their implications on the consumer lending industry in India.
| Factors | Description | Implications for Consumer Lending Industry |
| Political Factors | Government initiatives such as Pradhan Mantri Jan Dhan Yojana (PMJDY), Aadhaar-enabled services, Direct Benefit Transfer (DBT), and policy focus on financial inclusion and digital payments continue to strengthen formal financial access. | Expansion in formal banking access and digital financial infrastructure is expected to increase retail credit penetration, improve borrower onboarding, and support growth in consumer lending across underserved and rural markets. |
| Economic Factors | The Reserve Bank of India has also continued to strengthen regulatory frameworks relating to digital lending and customer protection. | |
| Social Factors | Rising retail demand, improving banking sector asset quality, increasing urbanisation, and expansion in formal credit channels continue to support growth in lending activity. Scheduled commercial banks (SCBs) and NBFCs continued to witness credit growth during FY25. | Increasing consumption expenditure and improving access to formal credit are expected to support growth in personal loans, housing finance, vehicle finance, and consumer durable financing segments. |
| Social Factors | Rising financial awareness, changing consumer lifestyles, increasing digital literacy, and growing middle-income population are supporting higher adoption of formal credit products and digital financial services. | Higher acceptance of retail credit products and digital lending platforms is expected to increase consumer loan penetration and expand the customer base for lenders. |
| Technological Factors | Expansion of Unified Payments Interface (\u201cUPI\u201d), e-KYC | Technological advancements are expected to improve |
| infrastructure, Aadhaar-enabled authentication, digital | operational efficiency, enable faster loan processing, | |
| payment systems, and adoption of artificial intelligence | reduce turnaround time, and enhance accessibility of | |
| (\u201cAI\u201d) and data analytics continue to strengthen digital | consumer credit through digital channels. | |
| lending operations. During 2024-25, digital payments | ||
| accounted for 97.6% of total payments in value terms. | ||
| Legal Factors | The consumer lending industry continues to operate | Increasing regulatory oversight may strengthen |
| under evolving regulatory frameworks relating to | transparency and customer protection; however, | |
| digital lending, cybersecurity, customer protection, fair | compliance requirements may increase operational | |
| lending practices, and governance standards issued by | and technology-related costs for lenders. | |
| the Reserve Bank of India. | ||
| Environmental Factors | Increasing focus on environmental, social, and | Adoption of paperless and digital lending models may |
| governance (\u201cESG\u201d) practices and adoption of digital | improve operational efficiency and support sustainable | |
| and paperless lending processes are influencing | business practices within the consumer lending | |
| operational practices within the financial sector. | ecosystem. |
5. Government Initiatives, Policy Support and Regulatory Framework
| Regulatory Framework / Initiative | Key Developments | Implications for Consumer Lending Industry |
| Unified Lending Interface (ULI) | RBI introduced Unified Lending Interface (ULI), a digital public infrastructure platform enabling lenders to access borrower-related data through standardised APIs for seamless digital credit delivery. | Enhances digital credit assessment, improves operational efficiency, and supports faster loan origination and disbursement processes. |
| Financial Inclusion Initiatives | RBI continued implementation of the National Strategy for Financial Inclusion (NSFI), expansion of banking access, financial literacy initiatives, and strengthening of the business correspondent framework. | Expansion of formal financial access is expected to support retail credit penetration and growth in lending activities across underserved segments. |
| Digital Payments Infrastructure Development | Indias digital payment ecosystem continued to expand through increasing adoption of digital payment systems and growth in payment acceptance infrastructure. | Strengthens digital lending ecosystem by enabling seamless loan disbursements, repayments, and digital financial transactions. |
| Customer Protection and Grievance Redressal Mechanisms | RBI strengthened customer protection frameworks through Complaint Management System (CMS) 2.0, Internal Ombudsman mechanisms, and enhanced supervisory oversight. | Improves transparency, strengthens borrower confidence, and supports responsible lending practices. |
| Artificial Intelligence (AI) and FinTech Enablement | RBI constituted the Framework for Responsible and Ethical Enablement of Artificial Intelligence (FREE-AI) committee to support responsible adoption of AI within the financial sector. | Encourages technology-driven lending models, automated underwriting, fraud detection, and operational efficiency improvements. |
| MSME Credit Support and Guarantee Schemes | Government initiatives such as Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Emergency Credit Line Guarantee Scheme (ECLGS), and priority sector lending frameworks continued to support credit flow towards MSMEs. | Supports growth in MSME lending portfolios, improves credit accessibility for small businesses, and reduces credit risk exposure for lenders. |
| NBFC-MFI Regulatory Framework | RBI issued updated directions for NBFC-Micro Finance Institutions (NBFC-MFIs) covering capital adequacy, governance standards, provisioning norms and reporting requirements. | Strengthening of prudential norms and governance standards is expected to improve operational resilience and financial stability within the microfinance lending ecosystem. |
The competitive landscape of Indias consumer lending industry is becoming increasingly dynamic and technology-driven, supported by rising retail credit demand, digitalisation of financial services, expansion of financial inclusion initiatives, and increasing participation of NBFCs and fintech entities. Competition within the sector continues to intensify as players strengthen digital capabilities, expand customer reach, improve underwriting models, and diversify lending portfolios across retail, MSME, and underserved borrower segments.
| Key Factors Shaping Competition | Competitive Strategies |
| \u2022 Access to Low-cost Funding - Availability and cost of borrowings remain critical factors influencing lending capacity, profitability, and competitiveness of NBFCs. | \u2022 Diversified Funding Strategy - NBFCs focus on diversifying funding sources through bank borrowings, debentures, securitisation, co-lending arrangements, and capital market instruments to optimise borrowing costs and liquidity management. |
| \u2022 Digital Lending and Technology Adoption - Increasing adoption of digital onboarding, AI-based underwriting, e-KYC, and data analytics is transforming customer acquisition and credit assessment processes. | \u2022 Technology-led Lending Strategy - Companies invest in digital lending platforms, automated underwriting systems, analytics-driven credit assessment, and digital collection infrastructure to improve efficiency and customer experience. |
| \u2022 Customer Reach and Financial Inclusion - Ability to expand operations across rural, semi-urban, and underserved borrower segments remains an important competitive differentiator. | \u2022 Expansion and Distribution Strategy - NBFCs strengthen branch networks, partnerships, business correspondent models, and digital channels to improve customer reach and lending penetration. |
| \u2022 Asset Quality and Risk Management - Strong underwriting standards, collection efficiency, and portfolio monitoring capabilities continue to influence operational performance and financial stability. | \u2022 Risk-based Underwriting Strategy - Companies focus on strengthening credit appraisal systems, monitoring mechanisms, and collection processes to improve asset quality and control impairment levels. |
| \u2022 Product Diversification Capability - Diversified exposure across personal loans, MSME finance, vehicle finance, gold loans, and microfinance segments supports portfolio resilience and growth opportunities. | \u2022 Portfolio Diversification Strategy - Players diversify lending portfolios across products, geographies, borrower profiles, and ticket sizes to reduce concentration risks and improve portfolio stability. |
| \u2022 Fintech Capitalization and Digital Competition - Increasing participation of fintech firms within unsecured and small-ticket lending segments continues to intensify competition within the sector. | \u2022 Fintech Collaboration and Innovation Strategy - Companies increasingly collaborate with fintech firms and digital ecosystem partners to improve scalability, customer acquisition, and technology integration within lending operations. |
Regulatory Approvals and Compliance Requirements: NBFCs are regulated by the Reserve Bank of India and are required to comply with capital adequacy norms, governance standards, provisioning requirements, cybersecurity frameworks, and regulatory reporting obligations. Increasing regulatory oversight may raise compliance and operational costs for new entrants.
Access to Low-cost Funding: Consumer lending businesses are highly dependent on borrowings and external funding sources. New entrants may face challenges in accessing diversified and low-cost funding due to limited operating history, lower credit ratings, and lack of established lender relationships.
Technology and Digital Infrastructure Investments: Digital lending operations require significant investments in technology platforms, data analytics, cybersecurity systems, artificial intelligence (AI), customer onboarding infrastructure, and digital payment integration capabilities.
Asset Quality and Credit Risk Management: Effective underwriting models, portfolio monitoring systems, collection infrastructure, and fraud detection capabilities are critical for managing impairment risks within unsecured and retail lending segments. Developing robust risk management systems may require significant operational expertise and historical borrower data.
Customer Acquisition and Distribution Network: Established NBFCs and fintech firms benefit from strong customer relationships, branch networks, partnerships, and digital distribution channels. Building customer trust and achieving scale in borrower acquisition may be challenging for new entrants.
Data and Credit Assessment Capabilities: Access to borrower data, credit bureau integration, analytics capabilities, and alternative credit assessment models play an important role in lending decisions and portfolio performance. Established players benefit from larger borrower databases and historical repayment information.
7. Company Overview
Paisalo Digital Limited is a Non-Deposit-Taking Middle-Layer Listed NBFC. The Company operates primarily in the segments of corporate loan, small income generation loan, vehicle finance, entrepreneurial loans, priority sector lending etc. Over the years, the Company has built a strong loan book.
The company has established a strong and rapidly expanding Pan-India high-touch distribution network, with a presence across 22 states supported by 5,299 touchpoints, 422 branches, 1,496 business correspondents, and 3,381 distribution points. This extensive footprint enables deeper market penetration in high-potential regions while driving expansion into new, contiguous markets.
The state-wise portfolio is well diversified, led by Delhi (28.0%), followed by Maharashtra (21.7%), Haryana (14.9%), Uttar Pradesh (14.1%), Rajasthan (13.1%), and other states (8.1%), reflecting a balanced geographic presence. The companys customer franchise has also witnessed impressive growth, increasing from 2 million in FY23 to 4 million in FY24, 9 million in FY25, and is projected to reach 16 million by FY26, underscoring its successful expansion strategy, strong customer acquisition capabilities, and growing brand reach across India.
[Image: High-Touch: Pan India Network map]
[Charts: State wise portfolio breakup (%), Customer Franchise growth]
The Company has built a highly scalable and successful distribution platform by combining a branch-led model with asset-light touchpoint expansion, enabling rapid growth while maintaining operational efficiency. Its physical network has expanded significantly, with branches increasing from 220 in FY23 to 422 in FY26, strengthening on-ground visibility, customer trust, underwriting quality, and servicing capabilities. At the same time, distribution touchpoints have grown from 400 to 3,381, allowing the Company to achieve cost-efficient market penetration through institutional partnerships and service hubs without significant capital investment. Complementing this, the number of Business Correspondents (BCs) has increased from 432 to 1,496, enhancing last-mile connectivity, financial inclusion, and customer onboarding across rural and semi-urban markets through trusted local networks. This balanced expansion strategy combines physical presence with an asset-light operating model, supporting sustainable scale, strong customer acquisition, and long-term profitability while preserving balance sheet flexibility.
[Charts: Branches, Distribution Touchpoints, Business Correspondents]
Critical on-ground presence for visibility & trust: Branches act as anchor touchpoints that enhance customer confidence, strengthen local brand visibility, and support high-quality underwriting and servicing.
While branches require operating and capital expenditure, they remain essential for market development, supervisory control, and building long-term franchise strength.
Zero-capex distribution expansion: Rapidly scale physical reach without branch investments by leveraging institutional partnerships as origination and service hubs, enabling cost-efficient market penetration.
Sustainable and scalable platform: This model enhances sourcing quality while maintaining strong ROE and preserving balance sheet flexibility for long-term financial health.
Zero-cost grassroots expansion: BCs help establish deep ground-level presence without any capex/opex leveraging local trust networks.
Strengthens last-mile delivery & credit inclusion: The BC model ensures efficient onboarding, data collection, and servicing in rural and semi-urban pockets, boosting penetration without balance sheet stress.
The financial performance analysis of Paisalo Digital Limited presents an overview of its operational and profitability trends over FY24 to FY26. The assessment highlights key indicators such as revenue from operations, total income, EBITDA, and profitability margins, reflecting the companys operational efficiency and financial stability.
Figures in INR Million (Except for ratios and percentages)
| Key Indicators | FY 2026 | FY 2025 | FY 2024 |
| Total Income | 9,436.98 | 7,711.07 | 6,587.46 |
| EBITDA | 7,057.69 | 6,013.50 | 5,141.81 |
| EBITDA Margin | 74.79% | 77.99% | 78.05% |
| PAT | 2,372.06 | 2,001.21 | 1,789.73 |
| PAT Margin | 25.14% | 25.95% | 27.17% |
| Current Ratio | 1.39 | 1.41 | 1.5 |
7.4 Company Positioning
Bridging the Credit Gap: Connecting unbanked and underserved populations, including MSMEs, to the formal financial ecosystem.
Accessible & Tailored Loan Offerings: Designed to meet the unique needs of diverse borrower segments.
The Company is positioned as a technology-driven non-banking financial company (NBFC) focused on financial inclusion, small-ticket retail lending, and MSME financing across underserved and underbanked customer segments in India. The company primarily operates within the consumer lending ecosystem with emphasis on income generation loans, rural and semi-urban credit penetration, and digitally enabled lending solutions. Paisalo Digital Limited is registered with the Reserve Bank of India as a Non-Banking Financial Company - Investment and Credit Company.
The company operates through a High Tech: High Touch business model, integrating digital technology platforms with physical customer outreach and assisted distribution capabilities to improve accessibility of formal credit across financially underserved regions. Paisalo Digital Limited leverages technology-enabled onboarding systems, Aadhaar-based e-KYC processes, analytics-driven underwriting models, and digital servicing infrastructure to facilitate loan origination and collections.
The company primarily caters to self-employed individuals, small business operators, micro-enterprises, first-time borrowers and economically weaker customer segments that may have limited access to formal banking channels. Its product portfolio includes income generation loans, SME and MSME loans, mobility loans, loan against property, and other retail credit products aimed at supporting livelihood generation and entrepreneurial activities.
A key differentiating factor in the companys positioning is its co-lending business model with banks under the co-lending framework prescribed by the Reserve Bank of India. Under this framework, partner banks participate in loan funding while Paisalo undertakes sourcing, servicing, collections, and customer management functions. According to the companys website, Paisalo Digital Limited has entered co-lending partnerships with:
State Bank of India, Bank of Baroda, Punjab National Bank, UCO Bank, and Karnataka Bank.
The companys positioning is further supported by structural developments within Indias financial ecosystem, including increasing adoption of digital payments, expansion of digital lending infrastructure, implementation of Aadhaar-enabled e-KYC systems, and growth in formal financial inclusion initiatives led by the Government of India and the Reserve Bank of India.
| Scale | Distribution | Granularity | Asset Quality | Liability | Profitability |
| AUM Rs. 61,009 Mn | States & UTs 22 | Customer Franchise ~16Mn | GNPA 0.76% | Total Borrowings Rs. 43,597 Mn | Yield 17.00% |
| Disbursement Rs. 42,620 Mn | Branches 422 | Secured Portfolio 93% | NNPA 0.61% | Capital Adequacy 35.80% | NIM 6.83% |
| Employee 3,076 | Distribution Points 3,381 | Average Ticket Size Rs. 4.84 Lakh | Liquidity Coverage 8.3x | Cost of Borrowing 10.20% | ROA 3.80% |
| Net Worth Rs. 17,930 Mn | Business Correspondence 1,496 | Co-Lending Partners 5 | Collection Efficiency 98.50% | Debt Equity Ratio 2.43x | ROE 13.20% |
The company has demonstrated consistent and resilient growth across multiple business cycles, successfully expanding its Assets Under Management (AUM) from INR 153 million in FY96-2000 to INR 61,009 million by FY26. Between FY21 and FY26, the business has achieved an impressive ~21% CAGR, reflecting a strong and sustainable growth trajectory driven by disciplined execution, diversified lending, and strategic expansion initiatives.
The growth journey can be divided into three distinct phases. During the initial Phase, the company established its market presence through its incorporation in 1992, stock exchange listing in 1996, and successful fundraising via a GDR issue. In the Scaling Phases, the company strengthened its franchise by rebranding as Paisalo Digital Limited, expanding co-lending partnerships with leading financial institutions, and receiving promoter capital infusion to support future growth. The current Expansion Phase is characterized by rapid AUM growth, broader market penetration, and enhanced strategic partnerships.
The companys financial strength is reflected in its improving credit ratings, progressing from A+/Stable to A-/Stable, and further to A/A/Stable/A+, underscoring its sound asset quality, prudent risk management, and strong governance framework. These upgrades reinforce the companys credibility among lenders, investors, and other stakeholders.
Operationally, the company has significantly expanded its footprint across India. Its presence has grown from 10 states to 22 states, while customer touchpoints have increased from just 100+ to over 5,299, demonstrating its ability to scale distribution efficiently and improve financial inclusion across underserved markets.
Several strategic milestones have accelerated this growth trajectory. These include co-lending partnerships with SBI, Bank of India, PNB, UCO Bank, and Karnataka Bank; recognition through the HURUN Industry Achievement Award - Digital Lending 2024; the issuance of its first FCCB of USD 50 million; its maiden ECB issuance of USD 15 million; and an international partnership with Indusland Banks overseas banking business. These achievements highlight the companys increasing access to capital, strong institutional relationships, and growing reputation in domestic and international financial markets.
7.6 Scaling Loan Book with Sustained Disbursals
The company has continued to strengthen its loan portfolio through consistent disbursement growth and disciplined portfolio management. Assets Under Management (AUM) increased by 17% year-on-year to INR 61,009 million in FY26, reflecting sustained demand across customer segments and the companys ability to scale its lending operations while maintaining portfolio quality.
Growth has been driven by balanced expansion across both MSME/SME lending and the Small Income Generation (SIG) segment. MSME/SME AUM has grown steadily from INR 21,815 million in FY22 to INR 43,316 million in FY26, while the SIG portfolio has expanded from INR 5,158 million to INR 17,693 million during the same period. This diversified growth strategy enables the company to capture opportunities across multiple borrower categories while reducing concentration risk.
The companys disbursement momentum has remained robust, supporting the expansion of its loan book. Total disbursements have increased consistently from FY22 to FY26, with MSME/SME disbursements rising from INR 14,237 million to INR 30,473 million, complemented by steady growth in SIG disbursements to INR 12,147 million. This demonstrates strong customer acquisition, efficient distribution capabilities, and the companys ability to generate recurring lending opportunities.
The FY26 business mix highlights a well-diversified portfolio across industries. Food & Hospitality represents the largest segment at 24%, followed by Agri & Allied Activities (14%) and Street Vendors (14%). Other meaningful exposures include Heavy Industries (1%), Other MSME/SMEs (1%), Technology (8%), Health & Education (5%), Textiles (4%), Vehicle Financing (3%), and Other Income Generation activities (6%). This diversified sectoral exposure reduces portfolio concentration risk while positioning the company to benefit from growth across multiple segments of the Indian economy.
Scaling Loan Book with Sustained Disbursals AUM expands by 17% YoY to INR 61,009 mn in FY26, with steady expansion across segments
[Image: Proven through Cycles, Scaling with Stability - timeline graphic]
[Charts: AUM Breakup (INR Mn), Disbursement Breakup (INR Mn), AUM Breakup: FY26 - By Business Mix (%)]
7.7 Our Loan Offering (Opportunity and Solution)
The company has developed a comprehensive portfolio of loan products designed to address the diverse financing needs of individuals, micro-entrepreneurs, and small businesses. Its offerings are broadly categorized into Small Income Generation (SIG) loans and SME/MSME loans, enabling the company to serve customers across different stages of their credit journey while supporting entrepreneurship and financial inclusion.
The Small Income Generation (SIG) portfolio, which contributes 29% of FY26 AUM, focuses on first-time and emerging borrowers with loan tenures of up to 48 months. Products such as Vikas Loan cater to first-time borrowers who are new to formal credit, while Umeed Loan and Pragati Loan support second- and third-time borrowers with established repayment histories. Specialized products like Daka Dum Loan finance two-wheelers for small businesses and delivery personnel, while Gati Loan provides funding for auto-rickshaws used by drivers and delivery operators. These products primarily serve food and tea stall owners, street vendors, tailors, poultry businesses, and other micro-enterprises, helping them build credit histories and expand their livelihoods.
The SME/MSME portfolio represents the companys core business, accounting for 71% of FY26 AUM, with loan tenures extending up to 84 months. This segment offers customized financing solutions for retailers, small traders, manufacturers, and other small businesses. Products such as Raftaar Loan Finance commercial vehicles for cab drivers and delivery services, while Ready Steady Go Loan supports vehicle purchases for small businesses. Udaan Loan provides working capital and business expansion financing, complemented by broader SME/MSME business loans that address a wide range of enterprise funding requirements. This diversified product suite enables the company to serve businesses at various stages of growth while fostering long-term customer relationships.
Together, these tailored loan offerings reflect the companys customer-centric approach, addressing specific financing requirements across different borrower segments. By combining income-generation loans with comprehensive SME/MSME financing solutions, the company has built a diversified lending franchise that supports economic development, promotes financial inclusion, and creates opportunities for sustainable portfolio growth.
[Diagram: Loan Product Offerings - Small Income Generation and SME/MSME]
[Charts: The Opportunity - Target Market Population, Income Tax Pan Holders, India Population; MSME Loans: The Opportunity]
1 Issued Share Capital INR 90,96,46,874 Consisting of 90,96,46,874 Equity Shares of face value of INR 1/- each 2 Subscribed Share Capital INR 90,96,46,874 Consisting of 90,96,46,874 Equity Shares of face value of INR 1/- each 3 Paid-up Share Capital INR 90,95,84,374 Consisting of 90,95,21,874 Equity Shares of face value of INR 1/- each fully paid-up and INR 62,500 for 1,25,000 forfeited equity shares of face value of INR 1/- each (amount originally paid-up @ INR 0.5 each)
[Image: Brand logos - Medical Equipment, Industrial Equipment, Alternative Fuel, 3-Wheeler & SCVs, Agri Equipment, 2-Wheeler]
[Image: Four strategic pillars - Last-Mile Scale, Broadening Product Suite, Expand Geographically, Optimizing Cost of Capital]
The Authorized Share Capital of the Company stood at INR 1,80,00,00,000 consisting of 1,75,00,00,000 Equity Shares of INR 1/- (Rupee One only) each and 50,00,000 Preference Shares of INR 10/- (Indian Rupees Ten only) each. Consequent to allotments made during the year, the Issued Share Capital, Subscribed Share Capital and Paid-up Share Capital of the Company has been increased and accordingly as on March 31, 2026, the same stood as under:
As on March 31, 2026, Company has only one class of outstanding issued share capital i.e. Equity Shares of face value INR 1/- each and on March 31, 2026, total fully paid capital stood at INR 909.52 million and other equity stood at INR 16,819.62 million.
The Book value of per equity share of the Company stood at INR 16.61/- as on March 31, 2026.
7.10.1 M/s Infomercies Valuation and Rating Pvt. Ltd. assigned the following rating to the Companys instruments:
| Sr. No. | Instrument/Facility | Amount (INR in Million) | Rating Assigned |
| 1 | Fund-Based Facilities from Banks - Long Term | 45,000.00 | IVR AA/ Stable (IVR Double A; with Stable Outlook) |
| 2 | Non-Convertible Debentures | 20,590.00 | IVR AA/ Stable (IVR Double A; with Stable Outlook) |
| 3 | Commercial Paper | 5,400.00 | IVR A1+ (IVR A One Plus) |
7.10.2 M/s Brickworks Ratings India Private Limited, vide its letter dated April 20, 2026, assigned the following rating to the Companys instruments:
| Sr. No. | Instrument/Facility | Amount (INR in Million) | Rating Assigned |
| 1 | Fund-Based Facilities from Banks - Long Term | 45,000.00 | BWR AA/ Stable |
| 2 | Non-Convertible Debentures | 15,000.00 | BWR AA/ Stable |
| 3 | Commercial Paper | 5,400.00 | BWR A1+ |
In compliance with regulatory requirements applicable to Non-Banking Financial Companies (NBFCs), the Company has established a robust Risk Management framework to ensure systematic identification, assessment, and mitigation of risks across all levels of operations.
The Company has constituted various committees including the Risk Management Committee, the Audit Committee, the Asset-Liability Management Committee (ALCO) and Fraud Monitoring Committee. The functioning and meeting frequency of these Committees are disclosed in detail in the Report on Corporate Governance, which forms an integral part of this Annual Report.
These Committees support the Board in evaluating and addressing business risks in a structured manner. The Company has adopted a comprehensive Risk Management Policy that focuses on maintaining sustainable growth with stability. The Policy outlines the process for identification of key risk events, assessment of their potential impact, and timely reporting, mitigation, and monitoring.
? Clearly defined risk governance structure with assigned roles and responsibilities;
? Identification and evaluation of principal business risks;
? Implementation of control measures to manage and mitigate these risks;
? A detailed Business Continuity Plan (BCP) to ensure resilience in adverse scenarios;
? Periodic monitoring and review of risk exposures and mitigation strategies.
The Company follows a disciplined approach to risk management, aligning business decisions with a well-balanced risk reward strategy, thereby safeguarding stakeholder interests and supporting long-term value creation.
The risks that could have significant influence on the Company and Companys strategy to mitigate such risks are:
| Credit Risk | Associate risk |
| The risk of loss to the Company from the failure of customers or counterparties to fully honour their obligations to the Company, including the whole and timely payment of principal, interest and other receivables. It is measured as the amount at risk due to repayment default by customers or counterparties to the Company. Various metrics such as instalment default rate, overdue position, instalment moratorium, restructuring, onetime resolution plan, debt management efficiency, credit bureau information etc. are used as leading indicators to assess credit risk. | Strategy to mitigate such risk: Company has a strong governance framework in place for identifying, assessing, measuring, monitoring, controlling and reporting credit risks in a timely and efficient manner. Fixing up the responsibility of business units for effective credit risk governance. Continuously aligning credit and debt management policies and resourcing, obtaining external data from credit bureaus and reviews of portfolios and delinquencies by senior and middle management team observe early warning signs of delinquency and ensuring proactive measures to maintain asset quality. Customize risk measurement approaches for various portfolio segments/sub-segments. |
| Liquidity Risk | Associate risk |
| --- | --- |
| The risk that the Company is unable to meet its contractual or contingent obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets. Funding risk arises from: | Strategy to mitigate such risk: Liquidity Risk measure, monitored and managed by the Company as under it is measured by: |
| \u2022 Holding optimum levels of liquidity to manage business requirements and maturing debt obligations. | |
| Technology Risk | Associate risk |
| --- | --- |
| The risk that comes from lack of up-to-date systems, system failure and continuously changing cyber threat landscape. | Strategy to mitigate such risk: To mitigate technology risk Company has taken following steps: |
| Technology Risk | Associate risk |
| --- | --- |
| The Company manages operational risks through comprehensive internal control systems and procedures laid down around various key activities in the Company viz. loan acquisition, customer service, IT operations, finance function etc. Internal Audit also conducts a detailed review of all the functions from time to time, this helps to identify process gaps on timely basis. Further IT and Operations have a dedicated compliance and control units within the function who on continuous basis review internal processes. This enables the Management to evaluate key areas of operational risks and the process to adequately mitigate them on an ongoing basis. Further, the Company has put in place a robust Disaster Recovery (DR) plan and Business Continuity Plan (BCP) to ensure continuity of operations including services to customers. |
7.12 Human Resource Development
The Human Resource (HR) function in the Company remains focused on improving organizational effectiveness, developing frontline leaders, promoting employee empowerment and maintaining stability and sustainability amidst growth and a rapidly changing business environment. As at Palisao we believe that happy employees are the key for Companys success. The Company has a work environment that inspires people to do their best and encourages an ecosystem of teamwork, continuous learning and work-life balance. In an increasingly competitive market for talent, the Company continues to focus on attracting and retaining the right talent. The Company fosters work-life balance and considers any kind of unfair treatment in the workplace. Regulation and compliance have remained as the major focus area for the Management of the Company. The Company enforces a strict compliant and ethical culture with adequate channels for raising concerns supported by a grievance handling mechanism. As on March 31, 2026, Employee headcount stood at 3,076.
Forming a crucial part of the financial ecosystem of India, NBFCs in India, helps the masses fulfill their needs for financial services. NBFCs have been extensively devoting their time to generating employment and transportation. Moreover, they provide credit to the people living in rural areas and benefit the weaker sections with much-needed financial support.
Millions of individuals in the country dont have access to formal credit. NBFCs can bridge this gap by providing them with financial support, requiring minimum documentation. SMEs (short for Small and Medium-Sized Enterprises)
require fast working capital. That is where the role of an NBFC in India comes in, as they can step in with their bespoke plans. They help entrepreneurs take their business to the next level while leveraging a great market opportunity. The NBFC sector is expected to experience robust growth driven by high credit demand across these segments.
The lending industry in India is expected to witness sustained growth over the medium to long term, supported by increasing formalisation of the economy, rising retail credit penetration, expanding digital financial infrastructure, and growing demand for small-ticket and unsecured credit products. The sector is also expected to benefit from favourable demographic trends, increasing urbanisation, rising disposable incomes, and expansion of financial inclusion initiatives across rural and semi-urban markets.
Growth in digital lending platforms, Aadhaar-enabled e-KYC infrastructure, Account Aggregator framework, Unified Payments Interface (UPI), and data-driven underwriting models is expected to continue transforming credit delivery and customer onboarding processes within the consumer lending ecosystem. Increasing adoption of digital payment systems and formal financial services is expected to improve borrower data availability, enhance credit assessment capabilities, and support faster loan origination and servicing.
The non-banking financial company (NBFC) sector is expected to continue playing a significant role in expanding credit access across underserved borrower segments, particularly within rural, semi-urban, self-employed, and MSME customer categories. NBFCs are likely to benefit from increasing co-lending partnerships with banks, improved digital infrastructure, and growing focus on financial inclusion and priority sector lending.
The unsecured lending segment, including personal loans and small-ticket consumer finance products, is expected to continue witnessing strong demand driven by increasing digital adoption, changing consumption patterns, and rising accessibility of formal credit channels. Fintech-led lending models and technology-enabled NBFCs are expected to continue expanding their presence within digitally originated lending segments through automated underwriting systems, analytics-driven credit assessment, and faster disbursement capabilities.
Further, increasing penetration of MSMEs, growth in self-employment and entrepreneurial activities, and rising consumption demand are expected to support long-term expansion of retail and MSME lending activities in India. Government initiatives relating to financial inclusion, digital payments, formalisation of credit delivery, and MSME credit support are also expected to support structural growth opportunities within the consumer lending ecosystem.
However, the industry may continue to face challenges relating to asset quality pressures within unsecured lending segments, regulatory tightening, cybersecurity risks, rising competition from fintech firms, and evolving compliance requirements. Increasing regulatory focus on digital lending practices, customer protection, governance standards, and data privacy may result in higher compliance and operational costs for lending institutions.
Overall, the consumer lending industry in India is expected to remain supported by structural growth drivers including digitalisation of financial services, increasing formal credit penetration, technology-enabled lending infrastructure, expanding financial inclusion initiatives, and growing participation of NBFCs and fintech entities within the retail lending ecosystem.
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