CHENNAI: For non-banking finance companies (NBFCs), education loans have emerged as the fastest-growing asset class, with assets under management (AUM) expanding by over 50% in recent years. However, that growth rate is expected to halve this fiscal, as disbursements for educational courses in the US slow following a raft of policy changes, according to a latest analysis by rating agency Crisil Ratings.
The US has introduced sweeping visa and policy reforms, including the suspension and subsequent resumption of visa processing under tighter social-media scrutiny—especially targeting certain countries and academic fields. The reforms also propose fixed-term student visas, enforce visa revocations linked to political activism, and have triggered legal challenges and institutional pushback.
These developments have heightened enrollment anxiety and financial risks for universities. For students from India and other countries, this has translated into longer waiting periods, additional documentation requirements, potential term limits, and greater uncertainty—particularly for those involved in activism or pursuing sensitive academic disciplines.
To mitigate the potential decline in business, NBFCs are diversifying into new geographies and adjacent product segments.
While non-performing assets (NPAs) in the NBFC sector have remained stable so far, asset quality remains a monitorable factor given global uncertainties and the significant portion of AUM still under contractual principal moratorium.
In fiscal 2025, the education loan AUM of NBFCs grew a robust 48% to ₹64,000 crore, following an even sharper 77% growth in fiscal 2024. However, growth is expected to moderate to around 25% this fiscal, with AUM reaching approximately ₹80,000 crore, according to CRISIL Ratings.
“Policy uncertainties in the US, combined with measures such as reduced visa appointments and the proposed elimination of Optional Practical Training norms, have curbed new loan originations. This led to a ~30% decline in total disbursements to the US last fiscal,” says Malvika Bhotika, Director, Crisil Ratings.
“Disbursements linked to Canada—the second-largest market—also declined as student visa rules became more stringent, including increased financial requirements through proof of available funds and caps on permits. As a result, overall education loan disbursements rose by just ~8% in fiscal 2025, compared with about 50% in fiscal 2024,” she adds.
To offset these headwinds, NBFCs have sharpened their focus on other geographies. Disbursements for courses in the UK, Germany, Ireland, and smaller destinations doubled in the past fiscal, as students increasingly opted for alternative study destinations. The share of these geographies in total disbursements rose to nearly 50% in fiscal 2025, up from 25% a year earlier. However, this shift is unlikely to fully compensate for the decline in US-linked disbursements.
Notably, the US share in the overall education loan portfolio fell to 50% as of March 31, 2025, from a peak of 53% a year earlier, and is expected to decline further over the coming years as lenders pivot toward other markets.
NBFCs are also expanding into domestic student loans and adjacent segments such as school funding, and loans for skill development, certification, and coaching. While these loans typically involve lower ticket sizes and may not materially alter portfolio composition, they can offer stability amid global headwinds.
According to Sonica Gupta, Associate Director at Crisil Ratings, NBFCs have maintained healthy asset quality despite global volatility.
“Gross NPAs in the segment remained low at 0.1% as of March 31, 2025. Even after adjusting for the moratorium, gross NPAs were well contained at 0.7%. However, the high growth witnessed over the past few years—and the fact that around 15% of the portfolio is expected to exit the moratorium this fiscal—poses some asset quality risks. The ability of NBFCs to scale up and sustain asset quality in newer domestic segments will be crucial,” Gupta noted.
Ultimately, the agility of NBFCs in navigating an increasingly complex global landscape—marked by policy shifts and evolving student preferences—will be vital for sustaining growth and long-term success.