Education-loan AUM of NBFCs seen up 20% despite slower US biz: Report

New Delhi: The growth in education-loan assets under management of non-banking finance companies is projected to stay steady at 20 percent this fiscal, with increasing diversification across study destinations offsetting the impact on demand for US-focused education amid policy uncertainties, a Crisil Ratings report said on Tuesday.

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Asset quality has been robust so far and is expected to stay stable, even as the share of the portfolio transitioning from moratorium to repayment has increased, the report said.

NBFCs (non-banking finance companies) typically structure education loans with a moratorium period aligned to course tenure, it said.

Repayment obligations, in the form of Equated Monthly Instalments (EMIs), are calibrated to borrowers' earning potential and which typically commence when the course is completed and the student gets employed, it said.

Nevertheless, with a substantial portion of the book still under contractual moratorium, the portfolio's performance over a broader repayment cycle remains to be fully tested, it said.

Policy and regulatory uncertainties in the US, including concerns around post-study work opportunities under the Optional Practical Training (OPT) programme and visa-related challenges, have weighed on student sentiment and fresh loan originations over the past two years, it said.

In addition, the report said, lenders have adopted a more calibrated approach towards financing students pursuing higher education in the US amid an evolving policy and employment environment.

The resulting shift in both student preferences and lending strategies was clearly reflected in disbursement patterns last fiscal, it said.

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US-linked disbursements declined a sharp 57 percent last fiscal, while those to the UK rose 24 percent, with other destinations also continuing to gain traction.

These geographies benefited from relatively stable visa regimes, favourable post-study work opportunities and growing acceptance among Indian students and they also attracted greater lender interest as portfolios became more diversified, it said.

As a result, portfolio composition has evolved meaningfully over last fiscal with the US share of overall education-loan AUM (assets under management) falling to 43 percent as of March 31, 2026, from 54 percent a year earlier.

The UK accounted for 29 percent of the portfolio, consolidating its position as the second-largest destination, while Germany, Ireland and other countries continued to increase their contribution.

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