NBFC Bank Borrowings Are Rising Again: What the RBI's October Bulletin Tells Lenders
NBFC bank borrowings are creeping up as credit grows fast. Here is what the RBI's October 2026 bulletin says and why lenders should care.
NBFC bank borrowings are climbing again, and the Reserve Bank of India has said it will keep a close eye on it. A staff report in the RBI's October 2026 Bulletin, covered by Business Standard on 23 October, describes a sector that is growing quickly, leaning more on banks for money, and shifting its loan mix toward gold and secured credit. For anyone who works in credit risk, lends through an NBFC, or invests in one, this is the freshest official picture of how the shadow-lending sector is funded.
A note on timing: the figures below are as of the end of December 2025, the latest period covered by the report, so treat them as a snapshot rather than live data.
Why bank dependence is back on the radar
Non-banking financial companies (NBFCs) lend like banks but cannot take ordinary current and savings deposits, so they must borrow to fund their loans. Their main sources are bank loans and market instruments such as debentures and commercial paper (short-term IOUs sold to investors). According to the report, these two sources together made up 77.2% of total NBFC borrowings at end-December 2025.
The RBI says reliance on banks rose moderately in 2025. It links this to two things: the restoration of risk weights on bank loans to NBFCs to the levels that applied before November 2023, and softer bank lending rates. A risk weight is the "tax" a bank pays in capital on each rupee it lends. When the RBI raised it in late 2023, lending to NBFCs became costlier for banks. Now that it has been rolled back, banks have more appetite.
An analogy helps. Think of an NBFC as a shopkeeper who sells on credit but buys stock on credit too. If most of the stock comes from a handful of wholesalers, a squeeze at the wholesalers hits the shop within weeks. The RBI's worry is similar: if banks and NBFCs are tightly linked, trouble at one can travel to the other.
Growth and the shape of the loan book
The report says NBFC loans and advances grew 24% at end-December 2025. Deposits at deposit-taking NBFCs rose 14.9%. Lenders also moved money out of investments and into core lending.
Secured loans, roughly three-fourths of the total, were the main engine. Unsecured lending also rose sharply, though the report attributes much of that to a base effect, meaning the starting point was low after earlier tightening.
Within retail credit, vehicle loans, the largest segment, slowed. Gold loans sped up and accounted for 10.5% of incremental NBFC credit between December 2024 and December 2025, helped by high gold prices. Microfinance and self-help group loans, by contrast, declined.
What it means for credit-risk teams
Three practical points stand out.
First, funding concentration is a risk in its own right, separate from borrower defaults. Teams should track what share of liabilities comes from banks versus markets, and how quickly each could dry up.
Second, gold-loan growth rides on a commodity price. Collateral values can fall faster than a loan book can be repriced, so loan-to-value buffers and auction processes deserve attention.
Third, the decline in microfinance and the slowdown in vehicle loans suggest that lenders are choosing their segments more carefully. Portfolio-level monitoring should reflect that shift rather than assume last year's mix.
The report does not say that any NBFC is in trouble, and the sources we reviewed do not include bulletin tables beyond those cited in the press coverage, so we cannot confirm segment-level figures beyond what is quoted here.
AI in NBFC lending
The same report notes growing use of AI in NBFC lending, risk assessment and operations. It points to the RBI's FREE-AI committee and its seven guiding principles for responsible adoption. Think of those principles as a seat-belt checklist: they do not slow the car, but they set expectations for how models should be built, tested and explained. Lenders using machine-learning scorecards or automated underwriting should expect supervisory questions on governance.
Key takeaways
- NBFC borrowing from banks and bond or paper markets was 77.2% of total borrowings at end-December 2025, and the RBI says bank reliance rose moderately in 2025.
- Loan growth of 24% was led by secured credit and gold loans, while microfinance declined and vehicle loans slowed.
- Expect continued RBI attention on bank-NBFC links and on responsible AI use in lending.
Sources
- [Business Standard: NBFCs' reliance on bank borrowings rises amid strong credit growth: RBI](https://www.business-standard.com/amp/industry/banking/nbfcs-reliance-on-bank-borrowings-rises-amid-strong-credit-growth-rbi-1261023016111.html)
- [RBI press release: 2026-27 list of Upper Layer NBFCs](https://www.rbi.org.in/Scripts/BSPressReleaseDisplay.aspx?prid=63301) (background on the NBFC framework)
Tags: NBFC RBI credit risk bank lending funding mix