Non-banking finance companies’ (NBFCs’) education loan portfolio is projected to grow nearly 20 per cent in financial year 2026-27 (FY27) to nearly ₹94,000 crore, led by increasing diversification across study destinations which is expected to offset the impact on demand for US-focused education from policy uncertainties, according to Crisil Ratings.
The education-loan assets under management (AUM) of NBFCs grew by 21 per cent in FY26 to ₹78,000 crore.
US-linked disbursements saw a sharp decline of 57 per cent in FY26, while those to the UK rose 24 per cent, with other destinations also continuing to gain traction. Geographies with relatively stable visa regimes, post-study work opportunities and growing acceptance among Indian students are seeing more benefits //(in terms of?)//, according to the report. These areas also attracted greater lender interest as portfolios became more diversified.
Policy and regulatory uncertainties in the US, including concerns around post-study work opportunities under the Optional Practical Training (OPT) programme coupled with visa-related challenges, have weighed on student sentiment and fresh loan originations over the past two years.
“The ongoing diversification of the destination mix is an important structural development for the sector. It not only provides an alternative growth avenue amid uncertainty in the US but also reduces dependence on a single geography and improves portfolio granularity,” said Malvika Bhotika, director, Crisil Ratings.
The US’ share in overall education-loan AUM fell to nearly 43 per cent as of March 31, 2026, from nearly 54 per cent a year earlier. The UK accounted for nearly 29 per cent of the portfolio as the second-largest destination abroad for education, up from 20 per cent in the previous year. Germany, Ireland and other countries continued to increase their contribution to education loan AUM.
“The sustainability of this trend will depend on employability and observed credit performance across these newer countries as portfolios mature. Nevertheless, while these markets differ from the US in terms of scale, course structures, earning potential and financing requirements, their growing contribution is expected to remain an important driver of sector growth,” Bhotika added.
NBFCs’ asset quality has been stable and is expected to remain as such, even as the share of the portfolio transitioning from moratorium to repayment has increased. NBFCs typically structure education loans with a moratorium period aligned to course tenure.
Overall more than 90 days past due (90+ dpd) loans stood at around 0.2 per cent as of March 31, 2026. Although loans under contractual moratorium continue to account for a significant share of the portfolio, their proportion has declined to around 73 per cent from 85 per cent a year earlier. In addition, strong prepayments have supported portfolio resilience despite the long contractual tenor of these loans.
Repayment obligations, in the form of equated monthly instalments (EMIs), are calibrated to borrowers’ earning potential and which typically starts when the course is completed and the student gets employed.
Nevertheless, with a substantial portion of the book still under contractual moratorium, the portfolio’s performance over a broader repayment cycle is yet to be fully tested.
Aesha Maru, associate director, Crisil Ratings said, “Encouragingly, the performance of loans that have exited moratorium and entered the repayment phase has remained steady, with 90+ dpd in the EMI-paying portfolio at around 0.8 per cent, compared with 0.7 per cent, a year earlier. This suggests that portfolio seasoning has not resulted in any meaningful weakening of repayment behaviour thus far, despite a challenging overseas employment environment.”