The country’s leading NBFCs are bracing for another year of tepid growth in disbursements and assets under management (AUM), as their core lending segments — commercial and passenger vehicles — are projected to grow at a low single-digit pace in the current fiscal.India’s passenger vehicle (PV) segment grew at a modest 5% in FY25 to 4.2 million units, while commercial vehicle (CV) segment remained flat at 1.01 million units.
According to the Federation of Automobile Dealers Associations (FADA), both these segments are expected to continue growing at a low single-digit rate in FY26 as well, amid subdued consumer demand, inventory overhang, and broader economic headwinds. Aniket Dani, director – research at Crisil Intelligence, said the overall vehicle finance AUM is set to moderate, with credit growth expected at a compound annual growth rate (CAGR) of 14–16% between FY25 and FY26, compared to a 21% year-on-year rise in FY24.
Crisil estimates the AUM of vehicle finance NBFCs to reach ~`9.4 lakh crore by March 2026.AM Karthik, senior vice president & co-group head, Financial Sector Ratings, Icra, said AUM of vehicle financing NBFCs is projected to grow 14–16% in FY26, compared to an estimated 15–17% in FY25 and 23% growth registered in FY24. “Commercial vehicles and passenger cars are projected to grow by 12–14% and 17–19% respectively in FY26, compared to 13–15% and 20–22% estimated for FY25,” he said.
The slowdown in commercial vehicle segment — which accounts for about 60% of vehicle financing NBFCs’ total assets— is expected to weigh on lenders’ disbursements. For instance, Sundaram Finance saw the share of disbursements to medium and heavy commercial vehicles (including retail CVs) in total disbursements decline from 46.5% in Q3FY24 to 43% in Q3FY25. Similarly, Shriram Finance reported a drop in the share of CVs in its total AUM to 45.49% in Q3FY25 from 47.83% a year earlier. The drop in disbursements and AUM are also part of the lender’s strategy to diversify into other areas of lending.
Sundaram Finance MD Rajiv Lochan earlier noted that commercial vehicle sales are closely linked to economic activity. The pick-up depends on the government’s capex spending, better monsoon and rural demand. “It could take a couple of quarters, and I expect a more visible pickup around the upcoming festive season — perhaps by Diwali,” he said.Crisil’s Dani, however, stated that CV volume grew at a subdued pace in FY25 but advances continued to grow, driven by strong demand for used CVs. “NBFCs have increased their market share (in used vehicles) by 800 basis points to 41% between fiscals 2019 and 2024.
”Tata Motors’ commercial vehicle sales declined 5% in FY25 to 376,903 units, while Ashok Leyland’s domestic CV sales fell 2% to 179,842 units.FADA’s outlook for FY26 remains cautious, with the industry body projecting dealers expect only a modest pickup in demand for school buses and passenger carriers, while freight demand continues to be patchy.With the outlook for new vehicle financing remaining subdued, Icra’s Karthik said the share of used vehicles in NBFCs’ overall AUM is set to rise further. “Competitive pressures, from banks, shall remain elevated in the new vehicle financing space,” he added.