NBFC Education Loan AUM Expected To Surpass Rs 60,000 Crore This Fiscal Year

Education loans, particularly those supporting overseas studies, are set to remain one of the fastest-growing sectors for non-banking financial companies (NBFCs), driven by the escalating demand for higher education.

Following remarkable growth rates of over 80 per cent in fiscal 2023 and 70 per cent in fiscal 2024, NBFCs' education loan assets under management (AUM) have surged to approximately Rs 43,000 crore as of March 31, 2024. This AUM is projected to expand by 40-45 per cent, potentially exceeding Rs 60,000 crore by the end of this fiscal year.

Despite country-specific challenges, the asset quality of NBFCs is anticipated to remain stable, according to an analysis by CRISIL Ratings.

NBFCs have successfully established a niche in the education loans sector by leveraging strong micro-market intelligence and quick turnaround times. Their specialised business models, underpinned by a deep understanding of relevant geographies, courses, universities, tenures and student profiles, allow for product customisation, enabling more accurate assessments of employability and risk-adjusted pricing.

The credit performance of these NBFCs has been resilient thus far, supported by robust underwriting standards. As of March 31, 2024, the 90 plus days' past due (dpd) rate for education loans was approximately 0.2 per cent, in contrast to gross non-performing assets of 2.0 per cent for private banks and 3.9 per cent for public sector banks. Peak quarterly delinquency on the vintage pool of 90 plus dpd for NBFCs has also remained below 1 per cent.
NBFCs have also demonstrated agility in responding to country-specific concerns. For example, while the U.S., U.K. and Canada remain popular study destinations, NBFCs have reduced their exposure to Indian students in Canada from 21 per cent to approximately 15 per cent as of March 31, 2024, in response to regulatory and operational changes in that country.

Strong capitalisation, bolstered by investor interest, has supported the credit risk profile and growth of these NBFCs. Their ability to sustain growth while maintaining asset quality, particularly as a larger portion of the portfolio exits moratorium in an evolving global macroeconomic environment, will be closely monitored.