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Education loan growth for Indian NBFCs is projected to halve to 25% in FY26 due to policy uncertainty in the US, according to Crisil Ratings. The loan portfolio stood at INR 64,000 crore in March 2025, with stable asset quality and 0.1% gross NPAs. A 27% YoY drop in US student visas-linked to tighter rules and funding cuts-has reduced loan originations. The US share in education loans has fallen from 53% to 50%, with further declines expected. NBFCs are shifting focus to the UK, Germany, Ireland, and domestic education segments. Crisil warns of asset quality risks as moratoriums end and newer lending areas expand.
Policy uncertainty in the United States is set to halve the education loan growth for Indian non-banking finance companies (NBFCs) in FY26. According to Crisil Ratings, the asset quality of the portfolio, which stood at INR 64,000 crore as of March this year, is 'stable' for now, with gross non-performing assets ratio of 0.1 percent. However, this should be closely monitored. Advertisement
A recent media report indicated that there has been a 27 percent drop Y-oY in the number of student visas issued by the US in the last quarter. This drop is attributed to a slew of changes in the US education landscape under President Donald Trump, including cutting aid to universities and tightening visa rules.
The Crisil report said the education loan segment has grown at around 50 per cent for the last two consecutive fiscals, and is estimated to halve to 25 per cent in FY26.
According to Malvika Bhotika, Director at Crisil, "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."
She also pointed out that disbursements linked to even Canada, the second-largest market, fell as student visa rules became stricter, including increased financial requirements via proof of available funds, and a cap on permits.
The share of the US in overall education loan portfolio has already come down to 50 per cent as of March 31, 2025, from a peak of 53 per cent as seen on March 31, 2024.This is expected to go down further over the next few years as lenders gravitate towards other geographies.
The agency said NBFCs have sharpened their focus on other geographies to offset these headwinds, and are preferring the UK, Germany, Ireland and smaller countries as students opted for alternative destinations. It said the share of such geographies in total disbursements rose to almost 50 per cent in FY25 from 25 per cent a year ago.
Lenders are also looking at domestic student loans and adjacencies such as school funding, loans for skill development, certification and coaching.
Sonica Gupta, Associate Director, Crisil Ratings, said the high growth in the past few years and an estimated 15 per cent of the portfolio coming out of contractual moratorium this fiscal pose some asset quality risks."The ability of NBFCs to scale up and maintain asset quality in some of the newer domestic products will bear watching as well," Gupta said.
Source: PTI
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