NBFC and Insurance Sectors Expected to Rebound Sharply in H2FY26, Says Emkay Research

Mumbai, 10 July 2025: A fresh analysis by Emkay Research forecasts a significant recovery in India’s non-banking financial companies (NBFCs) and insurance segments during the second half of FY26. The renewed optimism comes amid a more favourable regulatory backdrop and active government efforts aimed at driving sectoral growth.

Second Half of FY26 Likely to Outperform as Policy Support Strengthens

Emkay Research highlights that NBFCs and insurance players are poised for a stronger performance in H2FY26. This expected turnaround is attributed to policy interventions and a regulatory shift focused on enabling expansion and efficiency.

The report states, “Easing of the regulatory environment in both the NBFC and insurance spaces, and growth impetus by the regulators and the government, set the platform for stronger performance in H2FY26.”

Subdued First Half Reflects Lingering Sectoral Challenges

The beginning of FY26 has proven to be underwhelming for both segments. NBFCs continue to face limited momentum in assets under management (AUM) growth, asset quality improvement, and credit cost containment. Similarly, insurance companies have not yet recorded notable gains in business performance or customer traction in the past few quarters.

However, stress in some high-risk segments, particularly unsecured personal loans and microfinance institutions (MFIs), is beginning to decline. Emkay notes that this trend signals a potential return to stability, supported by broader market consensus.

Four Key Drivers May Revitalise the Financial Ecosystem

Emkay identifies four primary catalysts expected to revive growth and profitability across NBFC and insurance segments in H2FY26:

• RBI’s Anticipated Repo Rate Cut: A frontloaded 100 bps cut in CY25 could boost lending margins and profitability.
• Regulatory Relief: Potential reversal of increased risk weights on bank loans to NBFCs and relaxed provisioning norms for project finance.
• Rural Recovery: Favorable monsoon distribution and rural-focused schemes are likely to uplift credit demand in semi-urban and rural areas.
• Government-Led Growth Initiatives: Ongoing support through policy and fiscal measures to stimulate broader sector growth.

Investment Opportunities May Emerge Amid Short-Term Volatility

Despite recent regulatory shifts leading to market volatility, Emkay maintains a long-term positive view. The report considers NBFCs and insurance stocks as structural investment opportunities. Although much of the anticipated H2FY26 rebound may already be priced into current valuations, short-term market corrections could provide favourable entry points for long-term investors.

Growth in Auto and Consumer Lending Remains Critical to Full Recovery

While macroeconomic tailwinds and policy support position the NBFC and insurance industries for revival, the report underlines that a sustained uptick in vehicle sales and consumption-led borrowing will be vital. These areas, if revived meaningfully, could help unlock the next phase of credit growth across both sectors.

As India’s financial services sector adapts to a shifting economic landscape, NBFCs and insurance firms appear well-placed to benefit from the government’s growth-first approach in the second half of FY26.

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