Growth Divergence in NBFCs: A Deeper Look

Introduction

H1FY26 marked a clear change in the NBFC growth cycle. After several quarters of 20% plus expansion, sector credit growth moderated to around 17% year-on-year. At first glance, this looks like a broad-based slowdown. A closer look shows something more important. The slowdown is uneven.

While some NBFCs continue to report strong double-digit disbursement growth, others including large and well-capitalized players are seeing flat or muted momentum. This divergence is not random. It reflects a structural shift in what now determines growth in the NBFC sector.

In FY26, growth is no longer led by balance sheet strength alone. It is increasingly shaped by execution capability.

The Divergence Is Structural, Not Market-Led

The recent BCG India report on the NBFC sector highlights sharp dispersion across NBFC segments in H1FY26. Growth outcomes vary widely even within the same macro environment.

Several points stand out. Gold-focused NBFCs continued to grow at a rapid pace. Diversified NBFCs also showed healthy expansion. Housing finance companies saw steady but slower growth. Microfinance institutions contracted, with profitability under severe pressure.

At the same time, disbursement-level data in the report shows that even within the same segment, some players are growing at 20–30% plus, while others are barely growing at all.

This divergence exists despite the following realities:

• Most NBFCs remain well capitalized, with CRAR well above the 15% regulatory minimum

• Net interest margins stayed stable at around 6.6%

• Cost-to-income ratios improved marginally at the sector level

Source: BCG India NBFC Sector Roundup - H1FY26

Capital strength and margins have become table stakes. They no longer explain who grows and who stalls.

Growth Has Shifted From Balance Sheets to Execution Capability

In earlier cycles, growth leadership was closely linked to access to capital and funding. That equation has changed.

In FY26, faster-growing NBFCs are not expanding everywhere. They are scaling selectively in segments such as:

• Gold loans

• Secured retail credit

• Co-lending portfolios

Slower-growing players are often operating in the same markets, with similar funding access. Yet they struggle to convert demand into disbursements. What has changed is the nature of execution.

Growth now depends on how quickly an institution can:

• Configure and launch products

• Adjust underwriting thresholds and pricing

• Rebalance portfolios as risk signals emerge

This shift is visible in segment outcomes. Gold-focused NBFCs such as Muthoot Finance and Manappuram Finance benefited from highly standardized products, short loan tenors, and fast operational cycles. These characteristics allowed them to respond quickly to demand without increasing execution risk.

Microfinance institutions faced the opposite situation. Rising stress, higher credit costs, and operational complexity reduced their ability to adapt. Many were forced to slow or reverse growth, even where underlying credit demand existed.

The gap between demand and disbursement is now an execution gap.

Regulation Has Made Execution Speed a Competitive Advantage

Execution pressure has intensified due to regulation. BCG highlights a dense regulatory calendar in 2025 alone. Key changes include:

• New Co-Lending Arrangements effective January 2026

• Revised frameworks for gold loans

• New directions for non-fund-based credit facilities

• Draft rules on related-party lending

These changes are not cosmetic. They directly affect how fast NBFCs can grow. Under the new co-lending framework, lenders must now deal with:

• Borrower-level NPA recognition across partners

• Blended pricing instead of dual rates

• Faster fund settlement timelines

• Public disclosures on co-lending performance

For NBFCs, this means that growth cannot be separated from compliance execution. Institutions that cannot reconfigure retention logic, pricing rules, workflows, and reporting systems quickly are choosing to slow disbursements. This is not because demand is weak, but because operational and compliance risk has increased.

The result is that execution-ready NBFCs expand with confidence. Others pause growth, even when capital and market opportunity exist.

Digital Maturity for Execution: Control Is the Missing Link

The BCG report shows that NBFCs have made significant progress on digitization. Several leading players now report:

1. Over 90% digital onboarding, driven by paperless journeys using e-KYC, video KYC, digital agreements, and straight-through processing for standard products

2. Over 98% digital collections and servicing, enabled by automated EMI mandates (NACH, UPI AutoPay), digital self-service tools, and bot-led handling of routine requests

Yet high digitization has not eliminated growth divergence. The reason is simply that front-end digitization has become hygiene. Digital maturity in FY26 is no longer about smoother journeys alone. It is about control.

True digital maturity now requires:

• Embedded policy enforcement, not manual overrides

• Real-time visibility across origination, servicing, and collections

• Consistent execution across branches, partners, and channels

Without this internal control layer, many NBFCs prefer to slow growth rather than risk slippage. Even strong customer-facing platforms cannot compensate for weak internal controls. In effect, digital maturity has moved inward. It now sits at the core of execution.

Tech That Enables Mature Execution and Growth

Sustained disbursement growth in FY26 is increasingly linked to a specific set of technology capabilities. These are not cosmetic enhancements. They shape how safely and how fast an NBFC can scale.

Key capabilities include:

• Configurable product and policy engines: These allow lenders to modify products, limits, pricing, and eligibility without long IT cycles.

• Unified origination-to-collections data: This provides real-time visibility into risk, profitability, and compliance at a segment level.

• Segment-level controls: These enable selective scaling, rather than uniform expansion across portfolios.

• Audit-ready workflows and reporting: These reduce the trade-off between growth and regulatory comfort.

Historically, diversified NBFCs such as Bajaj Finance and Chola have demonstrated the value of this operating resilience. Their ability to combine control with speed has allowed them to sustain growth across cycles.

This is also where platforms like OneFin fit naturally into the ecosystem. By offering modular, low-code infrastructure across origination, loan management, and collections, such platforms allow NBFCs to adapt products and policies quickly while maintaining execution discipline.

The role of technology here is not to accelerate growth blindly. It is to make growth safer.

Conclusion

The divergence in NBFC disbursement growth in FY26 is not cyclical noise. It reflects a structural shift in how growth is achieved. Capital strength and market demand remain necessary. They are no longer sufficient.

In the current cycle, growth belongs to NBFCs that can execute quickly without losing control, and adapt continuously without increasing risk. The gap between those that can and those that cannot is now visible in disbursement numbers.

For lending leaders, the next phase of growth will be decided less by balance sheets, and more by execution infrastructure.

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