NBFCs Like Shriram Finance Set for a Comeback with Policy Support and Lower Rates

Non-Banking Financial Companies (NBFCs) have faced a challenging period recently. High delinquencies in unsecured loans, tight liquidity, and stricter regulations by the Reserve Bank of India (RBI) hurt their growth. As a result, the share prices of 104 listed NBFCs fell by 4.5% between January and May 2025, worse than the Nifty 500’s 1.5% drop.

Rate Cuts and Liquidity Boost

Things are starting to look better for NBFCs. The RBI has cut the repo rate by 1 percentage point so far in 2025. Also, it plans to reduce the Cash Reserve Ratio (CRR) in phases, which will inject ₹2.5 lakh crore into the banking system. This increased liquidity will reduce the cost of funds for NBFCs and improve their net interest margins (NIMs)—a key measure of profitability.

NBFCs that offer fixed-rate loans like vehicle loans and loans against property are likely to benefit the most, as their cost of funds falls, but income stays stable.

Relaxation for Gold Loans and MFIs

Starting April 2026, gold loan NBFCs can lend up to 85% of the gold value, up from 75%. This makes loans more attractive to borrowers and helps grow the loan book.

The RBI has also eased norms for microfinance institutions (MFIs). Now, they must hold only 60% of their portfolio in qualifying microfinance assets, down from 85%. This allows them to expand into new segments like affordable housing and consumer finance, helping to stabilise income across credit cycles.

Read more: Best Gold Stocks in India for July 2025: Titan, PC Jeweller and More Based on 5Y CAGR

NBFC Stocks Gaining Momentum

Since the policy announcements on 6 June, the NBFC sector has started to bounce back. The same group of 104 companies gave a return of 3.6% by 1 July, compared to a 2.1% gain in the Nifty 500 index.

Top Picks Among NBFCs

Note: These values are as of July 7, 2025

Conclusion

While NBFCs have faced significant headwinds recently, policy measures and improving liquidity conditions are setting the stage for a gradual recovery. Key players with strong fundamentals and the right loan mix may benefit more quickly. However, challenges like asset quality pressures and uneven demand still remain.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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