MUMBAI: For non-banking finance companies, education loans have been the fastest-growing asset class, clocking over 50% growth in the assets under management over the past few years. However, that frenetic pace of growth is set to halve this fiscal as disbursements for pursuing education in the US decelerate following a raft of policy changes in the world’s most sought after nation.
According to a Crisil analysis, the education loan book of NBFCs grew a rapid 48% to Rs 64,000 crore in FY25. That was on a higher 77% growth in the previous fiscal. But this fiscal, growth is seen moderating to 25% with to Rs 80,000 crore, it warned on Wednesday.
This comes on the back of a 30% decline in total disbursements to the US last fiscal, leading to very tepid 8% incremental growth in education loan disbursements in FY25, compared to 50% in fiscal 2024.
Notably, the share of US in overall education loan portfolio has already come down to 50% as of March 2025 from a peak of 53% as of March 2024, and is expected to go down further over next few years as lenders gravitate towards other geographies.
According to Malvika Bhotika, a director with Crisil Ratings, policy uncertainties in the US, combined with measures including vastly reduced visa appointments and the proposed elimination of optional practical training norms have culled newer loan originations. This has led to a 30% 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. Consequently, overall education loan disbursements were up only 8% in fiscal 2025, compared to 50% in fiscal 2024, she said.
To offset these headwinds, non-banks have sharpened focus on other geographies. Disbursements linked to courses in England, Germany, Ireland and smaller countries have doubled in the past fiscal as students opted for alternative destinations. The share of such geographies in total disbursements rose to almost 50% in fiscal 2025 from 25% a year ago. But this will not fully offset the decline in US-linked disbursements, the report warned.
Non-banks are also looking at domestic student loans and adjacencies such as school funding, loans for skill development, certification and coaching. 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.
According to Sonica Gupta, an associate director with the agency, despite these negative global developments, non-banks have maintained healthy asset quality so far. Gross NPAs stood low at 0.1% as of March 2025. And even after adjusting for the moratorium, gross NPAs are well under control at 0.7%. However, high growth in the past few years and estimated 15% of the portfolio coming out of contractual moratorium this fiscal, pose some asset quality risks.
Also, asset quality will be monitorable given the global uncertainties and as much as 85% of education loans have a contractual principal moratorium till the education is over plus one-year of additional grace period to begin repayments.