Best NBFC Stock to Buy in India

As India is poised for its ambitious economic goals to become a fully developed economy by 2047, ensuring 6.5–7.5% real GDP growth on average, easy access to credit is paramount.

And thus, the Non-Banking Financial Company (NBFC), the shadow banking sector, remains pivotal for credit expansion and financial inclusion.

Invest in Indian Markets and Unlock Future Potential With 5paisa!

Open Account Now

Resilient government CAPEX on infrastructure and the increasing delinquencies and risks in unsecured digital lending (consumer durables) are pushing NBFCs to focus more on asset-backed (secured) lending.

NBFCs are increasingly lending to core infrastructure players like railways, power, and renewable energy. Apart from infra, NBFCs are also focusing on microcredit in rural and underserved segments, which generally offer higher NIMs and a robust collection mechanism.

Recent RBI rate cuts (125 bps in 2025) and liquidity injections are supporting higher NIMs in the MFI segment, ensuring strong AUM growth and asset quality.

NBFC Growth Outlook

NBFC topline (lending) is expected to grow at around 15% CAGR on average over the next five years (2026–2030), broadly in line with India’s estimated nominal GDP growth of 10–12%.

This growth will be driven by government-led infrastructure spending and a revival in rural demand. MFIs are benefiting from the government’s push for financial inclusion.

However, risks remain in the form of RBI regulatory tightening and rising delinquencies or NPAs in certain segments, particularly unsecured consumer lending in subprime categories.

Changing NBFC Lending Landscape

The NBFC lending landscape is shifting away from subprime unsecured lending toward secured segments such as:

• Commercial vehicles (CVs)
• Tractors
• SME and business loans
• Small and mid-sized infrastructure projects

This shift aligns with the government’s focus on multi-year infrastructure projects and the rural and semi-urban economy.

Key Tailwinds for NBFCs

• Infrastructure Boom: Government spending on power generation, transmission, renewables, and railways is creating sustained loan demand for specialised infrastructure financiers.
• Rate Cycle Support: RBI repo rate cuts are easing funding costs, improving net interest margins (NIMs) and borrower repayment capacity.
• MFI Recovery: After stress in unsecured segments, MFIs are focusing on rural women entrepreneurs, with disbursements rebounding amid strong door-to-door and group-based collections.
• Regulatory & Policy Stability: Policy clarity on co-lending and rule-based frameworks is supporting stable growth in business loans to larger and well-capitalised entities.

Key Headwinds for NBFCs

• Higher credit costs in vulnerable subprime lending segments
• Potential economic slowdown due to global and domestic factors
• Moderate pressure on profitability (NIMs), especially for less diversified players
• Increased RBI scrutiny on liquidity management and risk weights

Overall, NBFCs’ share in regulated and formal credit is projected to rise to 21% by FY26, highlighting their growing importance in India’s financial system.

Despite increasing regulatory oversight, NBFCs continue to play a vital role in financial inclusion, economic formalisation, and long-term growth.

Top Infrastructure-Focused PSU NBFC Stocks for 2026

Infrastructure financing has become a core theme for NBFCs, with a focus on high-quality secured lending rather than risky unsecured loans.

Such financing benefits from low-risk, shorter-tenure bridge loans at relatively higher NBFC lending rates, backed by government assets and predictable revenue visibility.

1) Power Finance Corporation (PFC)

PFC is a major PSU NBFC in India’s power sector financing ecosystem, covering generation, transmission, distribution, and renewable energy.

It benefits from India’s focus on energy security and the transition toward renewables. As a PSU, PFC trades at lower valuations and offers a high dividend yield, making it an attractive defensive investment.

2) REC Limited

REC, similar to PFC, is a PSU NBFC with significant exposure to power and infrastructure financing. It continues to benefit from strong government backing and long-term visibility in the power sector.

3) Indian Railway Finance Corporation (IRFC)

IRFC focuses on railway infrastructure, rolling stock, and related projects. It carries a near-sovereign risk profile and is considered a value pick during market corrections.

The government’s emphasis on railway CAPEX and recent fare restructuring may support stable cash flows and moderate NIM expansion going forward.

Diversified and Microfinance NBFCs

1) Poonawalla Fincorp

Poonawalla Fincorp is a new-generation NBFC expanding rapidly in digital consumer and SME lending.

It follows a tech- and AI-driven lending model with a focus on quality borrowers and diversified portfolios, supporting sustainable growth.

2) CreditAccess Grameen

CreditAccess Grameen is a rural-focused NBFC primarily targeting women entrepreneurs and individuals in underserved regions.

With regular government cash transfers supporting rural incomes, MFIs are leveraging predictable cash flows to improve collections and encourage productive economic activities.

3) L&T Finance

Part of the L&T Group, L&T Finance focuses on rural, housing, and SME lending.

Its diversified loan book, prudent risk management, and strong parent-group synergies support steady growth in both revenue and profitability.

4) HDB Financial Services

HDB Financial Services, a subsidiary of the HDFC Bank Group, is a diversified retail-focused NBFC operating across:

• Enterprise lending (LAP and business loans)
• Asset finance (CVs, tractors)
• Consumer finance (personal loans, gold loans, durables)

With nearly 1,800 branches and a strong presence in Tier-4 and rural locations, HDB benefits from HDFC Bank synergies and a large, diversified customer base.

Conclusion

India’s NBFC sector is expected to remain resilient due to disciplined, rule-based digital lending and a strong emphasis on quality over aggressive growth.

Both banks and NBFCs are increasingly focusing on the return of capital rather than just the return on capital.

MFIs and infrastructure-focused NBFCs are prioritising sustainable, secured, or near-secured lending models, supporting long-term asset quality.

In 2026, India’s NBFC sector continues to follow a disciplined, bottom-up approach and remains a bright spot within the broader Indian financial ecosystem.