NBFC borrowings to hit $750 billion by FY27 as market funding gains share: Avendus Capital

Borrowings by India’s Non-Banking Financial Companies (NBFCs) are expected to rise to $750 billion by FY27 as the sector accelerates its shift toward market-linked funding, according to a new study by Avendus Capital.

The report projects a 13% compound annual growth rate in overall NBFC borrowings, driven largely by reduced dependence on bank credit. Market-based instruments—including Non-Convertible Debentures (NCDs), External Commercial Borrowings (ECBs) and Commercial Paper (CPs)—are estimated to account for 64% of total borrowings by FY27, up from 43% in FY24. Bank credit currently constitutes 42% of NBFC funding.

ECBs are likely to see the fastest expansion, with projected 60% CAGR pushing outstanding ECB borrowings beyond USD 120 billion by FY27. NCDs are also expected to grow strongly at around 25% CAGR, crossing USD 330 billion.

The study notes divergent trends among NBFC layers. Upper-layer NBFCs (NBFC-ULs) are increasingly tapping global debt markets on the back of stronger credit profiles, with nine of fifteen NBFC-ULs increasing their ECB share between FY22 and FY25. Middle-layer NBFCs (NBFC-MLs) are leaning more on NCDs due to their higher yields and flexible maturities; fourteen of sixteen NBFC-MLs have expanded NCD borrowings over the same period.

“NBFCs in India are entering a new phase of maturity, with most players rewriting their funding playbook,” said Anshul Agarwal, Managing Director and Head of the Financial Institutions Group, Investment Banking at Avendus Capital. “The shift from bank borrowings to capital market instruments will strengthen liquidity resilience and reduce systemic risk across the sector. A supportive regulatory environment, particularly the RBI’s scale-based regulations, has been a key catalyst.”

Snigdha Khemka, Director, Financial Institutions Group, Investment Banking at Avendus Capital, said the transition mirrors broader changes in India’s financial markets.

“The inclusion of Indian bonds in global indices and the rise of SEBI-regulated online bond platforms have deepened the NCD market. With market instruments expected to contribute 64% of NBFC borrowings by FY27, the sector is positioned for improved access to capital, greater funding stability and stronger integration with global markets,” she said.