NBFC borrowings to touch USD 750 billion as market-based funding rises to 64% by FY27: Avendus Capital study
Mumbai, November 26, 2025
Avendus Capital, India’s premier investment bank, has released a study analysing a structural shift in the funding mix of India’s Non-Banking Financial Companies (NBFCs). The report projects that NBFC borrowings are set to rise at a 13% CAGR, reaching USD 750 billion by FY27, driven by a move away from bank dependence towards capital market instruments, such as Non-Convertible Debentures (NCDs), External Commercial Borrowings (ECBs) and Commercial Paper (CPs).
By FY27, market-based instruments are expected to make up 64% of total NBFC borrowings, compared to 43% in FY24, reflecting a gradual reduction in bank credit, which currently stands at 42%. Of this, ECB borrowings are projected to grow at 60% CAGR, crossing USD 120 billion, while NCD borrowings are set to expand at around 25% CAGR, exceeding USD 330 billion by FY27.
According to the report, upper-layer NBFCs (NBFC-ULs) are increasingly tapping global debt markets backed by strong credit ratings, with nine out of fifteen NBFC-ULs expanding their ECB share between FY22 and FY25. In contrast, middle-layer NBFCs (NBFC-MLs) are turning to NCDs, given their higher yields and flexible maturities, with 14 out of 16 NBFC-MLs having witnessed growth in their NCD borrowings, as per the report.
Anshul Agarwal, Managing Director and Head, Financial Institutions Group Investment Banking, Avendus Capital said, “NBFCs in India are entering a new phase of maturity, with most players rewriting their funding playbook. The shift from bank borrowings to capital market instruments will strengthen liquidity resilience and reduce systemic risk across the sector, marking a more balanced model where liability quality is as important as balance-sheet growth. We believe a key catalyst of this diversification has been a supportive regulatory environment, particularly the RBI’s scale-based regulations. With ECBs and NCDs emerging as the most promising instruments for NBFCs, the next phase of growth will be driven not just by how fast they lend, but by how intelligently they fund themselves.”
Snigdha Khemka, Director, Financial Institutions Group Investment Banking, Avendus Capital said, “NBFCs are broadening their funding sources beyond traditional bank credit, in line with regulatory guidance and market conditions. This shift reflects a broader transition in India’s financial ecosystem. The inclusion of Indian bonds in global indices, coupled with the rise of SEBI-regulated online bond platforms, have further deepened the Indian NCD market. With NBFC borrowings expected to reach USD 750 Bn in FY27 and market instruments (including NCDs and ECBs) contributing 64%, the sector is poised for improved access to capital, improved funding stability and deeper integration with global capital markets.”
About Avendus
Avendus Group is a leading financial services firm with a presence in the areas of Investment Banking, Institutional Equities, Wealth Management, Asset Management and Credit Solutions. Established in 1999 in Mumbai, India, Avendus is today present in 11 cities across India, US and Singapore. Avendus partners with the Indian entrepreneur ecosystem to provide differentiated solutions that enable clients to meet their strategic aspirations.
Avendus Capital, the investment banking arm, is consistently ranked among the top investment banks in the country on the back of its in-depth domain understanding and a best in the class track record of domestic and cross-border transactions. Avendus’ wide range of clients is testimony to its ability to serve its corporates throughout their life cycle – growth stage funding, large-sized transactions, M&A advisory and access to public markets.
Avendus Capital Inc., New York and Avendus Pte Ltd., Singapore are both Avendus Group entities offering services to clients in the US and Southeast Asia respectively.
For more information, please visit www.avendus.com
