Indian NBFCs may grow AUM 20% in Q2FY27 as funding costs rise

what happened

Diversified non-bank financial companies in India could deliver 20% growth in assets under management (AUM) in Q2FY27, although more expensive funding may weigh on margins. Asian News International reported the assessment from a JM Financial report. The brokerage said India’s macroeconomic backdrop has deteriorated since Q1FY27, with borrowing costs likely to become the main earnings concern in the second half of FY27 instead of demand.

The 10-year government bond yield has climbed 25–40 basis points since August 2026. Yields on three- and five-year AAA-rated NBFC bonds have risen 50–60 basis points since June 2026. JM Financial expects the funding-cost impact to pass through predominantly in FY28. It also said IRDAI’s draft rules affecting commission income could reduce profitability in FY28.

Retail activity, a measured revival in loans against property (LAP) and a larger contribution from gold lending are expected to support diversified NBFCs, as well as lenders focused on micro, small and medium enterprises (MSMEs) and gold loans. JM Financial forecasts aggregate AUM growth of about 20% year on year, compared with 19% in Q1FY27 and 17% in Q2FY26, with RoA and RoE near 3.0% and 15.1%. Vehicle financiers are expected to maintain healthy disbursements and roughly 18% YoY AUM growth, based on disbursement gains of 22% YoY and 4% QoQ, though some lenders may face a marginal increase in credit costs.

Housing finance companies (HFCs) and affordable housing finance companies (AHFCs) may post about 13% YoY AUM growth, backed by a 24% increase in disbursements. MFIs are expected to recover loan growth more quickly as higher-value lending improves and their core microfinance operations recover. Diversified financiers are seen leading earnings growth, followed by vehicle financiers, MSME and gold-loan lenders, and housing finance companies; MFIs may also recover from last year’s low base. For gold-loan, MSME and LAP lenders, JM Financial expects AUM growth of about 27% YoY and 6% QoQ, with disbursements up roughly 33% YoY. A gradual LAP recovery, healthy gold-loan growth and easing credit costs could support profitability.

why it matters

For markets, the report points to a split picture: resilient lending and AUM expansion support NBFC earnings, while higher funding costs could create a larger margin headwind in FY28.

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