Prime Highlights:
- Stringent US and Canadian visa policies slow NBFC education loan growth from 77% to 25% by FY26.
- NBFCs are eyeing new overseas markets as well as domestic education financing opportunities now.
Key Fact:
- Disbursements of loans as per the US fell by about 30% last year, Canada-origin loans also affected by stringent norms.
- AUM of NBFCs education loans will likely cross ₹80,000 crore in FY26 even with slower growth.
Key Background
Indian Non-Banking Financial Companies (NBFCs) are witnessing a change in strategy in their international education loan segment, courtesy of the recent tightening of student visa policies in leading destinations like the United States and Canada. So far, the two countries had cornered the market of NBFC-sponsored international education loans. Recent tightening of their financial and immigration requirements has however dislocated this stream.
The US has reduced the number of student visa appointments available and also made the Optional Practical Training (OPT) programs uncertain—key incentives for Indian students to pursue higher studies there. Consequently, education loan disbursements to the US fell by nearly 30% during the last fiscal year.
Canada also enacted stringent measures, raising the minimum proof-of-funds requirement more than that of a student permit and restricting student permits. These actions resulted in a sharp decline in the issuance of Canadian visas to Indian students, which also impacted the expansion of NBFC loans. Education loan disbursement growth overall thus lost steam significantly to only 8% in FY25 from 50% in FY24.
Despite this slowing down, overall AUM of education loans under NBFCs will continue to grow—at ₹43,000 crore in FY24 to ₹80,000 crore in FY26. Growth will be weaker at about 25% in FY26. Loan repayment track is healthy at present with gross NPAs at just 0.1%, though stress issue for the future remains with more and more borrowers emerging from the moratorium phase.
In order to readjust, the NBFCs have begun diversifying their loan book by tapping other overseas markets like the UK, Germany, and Ireland. Concurrently, they are growing in domestic areas like school education, vocational training, certification courses, and coaching institutes. All this is a planned move towards risk diversification and sustaining growth despite foreign regulatory hassles.
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