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For non-banking finance companies (NBFCs), education loans have been the fastest-growing asset class, clocking over 50 per cent growth in the assets under management (AUM) over the past few years.
According to Crisil Ratings, that pace is set to halve this fiscal as disbursements for pursuing educational courses in the US decelerate following a raft of policy changes there. To mitigate, NBFCs are diversifying into new geographies and product adjacencies. While non-performing assets (NPAs) have remained stable so far, asset quality will be monitorable given the global uncertainties and a large proportion of AUM (85 per cent) remaining under contractual principal moratorium. The education loan AUM of NBFCs grew rapidly by 48 per cent to Rs 64,000 crore last fiscal. That followed an even faster 77 per cent growth in fiscal 2024, according to Crisil Ratings. This fiscal, growth is seen moderating to 25 per cent with AUM reaching Rs 80,000 crore, the rating agency added. Malvika Bhotika, Director, Crisil Ratings, "Policy uncertainties in the US, combined with measures including reduced visa appointments and the proposed elimination of Optional Practical Training norms, have culled newer loan originations. This has led to a 30 per cent decline in total disbursements to that geography last fiscal." "Disbursements linked to even Canada, the second-largest market, fell as student visa rules turned stricter, including increased financial requirements via proof of available funds, and cap on permits," Bhotika added. Consequently, overall education loan disbursements were up only 8 per cent in fiscal 2025, compared with 50 per cent in fiscal 2024. To offset these business headwinds, NBFCs have sharpened focus on other geographies, asserted Crisil Ratings. Disbursements linked to courses in the UK, Germany, Ireland and smaller countries have doubled in the past fiscal as students opted for alternative destinations, it added. The share of such geographies in total disbursements rose to almost 50 per cent in fiscal 2025 from 25 per cent a year ago. But, according to Crisil Ratings, this will not fully offset the decline in US-linked disbursements. Notably, the share of the US in the overall education loan portfolio has already come down to 50 per cent as on March 31, 2025, from a peak of 53 per cent as seen on March 31, 2024. It is expected to go down further over the next few years as lenders gravitate towards other geographies. Faced with the crisis, NBFCs are also looking at domestic student loans and adjacencies such as school funding, loans for skill development, certification and coaching, the rating agency asserted. "Given the lower ticket sizes of such loans, their share in the overall portfolio is unlikely to be material, but they may lend some stability in times of global uncertainties," it supplemented. (ANI)
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