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NBFCs Brace for MSME, Vehicle Loan Stress Amid Fuel Supply Shock

A Nomura report warns that Non-Banking Financial Companies face rising risks in business, MSME, and vehicle loan segments due to fuel supply disruptions from the Iran conflict. The shock is expected to increase cost pressures, especially for small enterprises, with retail fuel price hikes anticipated after state elections. NBFCs are likely to become increasingly cautious, potentially slowing disbursals and facing elevated credit costs starting FY27. The vehicle loan segment, previously stable, now faces downside risks from higher fuel costs and weaker economic activity.

Key Points: NBFCs Face Rising MSME, Vehicle Loan Stress: Nomura Report

  • Fuel shock hits MSME loans
  • Vehicle loans face repayment pressure
  • NBFCs may slow disbursals
  • Credit costs to rise from FY27
2 min read

NBFCs face rising stress in MSME, vehicle loans amid fuel supply disruption: Nomura

Nomura warns of rising stress in NBFCs' MSME and vehicle loan portfolios due to fuel supply disruption from Iran conflict, impacting credit costs.

"retail prices to be hiked gradually after state elections (end-Apr26) - Nomura Report"

New Delhi, March 30

Non-banking financial companies may face rising risks in select loan segments amid a fuel supply shock triggered by the ongoing Iran conflict, with business, MSME and vehicle loans emerging as the most vulnerable categories, according to a report by Nomura.

The report assessed the impact of the Iran war, assuming it drags on for one month, and flagged growing concerns over segments directly linked to fuel consumption and economic activity.

It noted that NBFCs are likely to turn "increasingly cautious on business, MSME, vehicle loans segments where we expect an immediate and direct impact of the fuel supply shock."

Industrial diesel prices have already been increased, and the report cited that retail fuel prices are expected to be raised gradually after the state elections at the end of April 2026. This is likely to increase cost pressures across businesses, especially small enterprises.

It stated, "retail prices to be hiked gradually after state elections (end-Apr26)".

According to the report, secured and unsecured business loans, including loans against property, account for about 24 per cent of NBFC credit in India.

These segments are already showing signs of stress, with recent feedback indicating fuel shortage and price hike-related challenges faced by MSMEs.

"Some of them are trying to use alternate sources to keep their shops running while others have written to the government urging for support," the report said.

The report expects that NBFCs will remain cautious on business and MSME lending, with the segment likely to see elevated credit costs from the first quarter of FY27. There is also a risk that NBFCs may slow down disbursals in these categories.

Vehicle loans are also expected to face pressure due to a combination of rising fuel costs and weaker economic activity. Fleet operators may face higher diesel and petrol prices, along with reduced vehicle movement.

While large operators may be able to pass on higher fuel costs, individual vehicle owners could face repayment challenges.

The report noted that the vehicle loan segment, which had benefited post-COVID from stable fuel prices, healthy freight rates and strong economic activity, now faces downside risks due to global developments.

- ANI

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Reader Comments

S
Sarah B
The timing is terrible, right after elections. It feels like fuel price hikes are always "just around the corner" but the impact is immediate for logistics and transport. My husband's trucking business is already seeing fewer orders.
A
Arjun K
Nomura's report is a reality check. We've had it good with stable fuel prices post-COVID, but global conflicts hit us hard. The focus should be on accelerating our shift to electric vehicles and alternative energy for MSMEs. Jai Hind!
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Priya S
Just bought a car last year with an NBFC loan. Now with petrol prices set to rise, my monthly budget is going for a toss. This report makes me anxious about my EMI. Banks and NBFCs should offer some temporary relief or restructuring options.
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Vikram M
While the concerns are valid, I feel the report might be a bit alarmist. The Indian economy and our NBFCs have shown resilience before. Yes, there will be stress, but the system will adapt. Let's not panic.
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Karthik V
The link between global politics and our local kirana store's loan is so clear here. When will we become truly self-reliant in energy? This over-dependence on imported fuel is a national security and economic risk. Time for urgent action.

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