India's digital lending boom is giving non-banking financial companies (NBFCs) a fresh growth engine. As more borrowers turn to online credit platforms and fintech partnerships expand, lenders are seeing stronger loan growth while keeping bad loans under control.
Northern Arc Capital is the latest beneficiary of this trend. The company on Monday reported its highest-ever quarterly profit, driven by strong growth in its digital lending business and continued demand for loans from retail borrowers and small businesses.
Northern Arc posted a profit after tax (PAT) of Rs 114 crore for the June quarter, up 41% from a year ago. Net interest income (NII), a key measure of a lender's earnings, rose 32% to Rs 394 crore, while pre-provision operating profit increased 27% to Rs 263 crore.
Digital lending continues to drive growth
The company's lending assets under management (AUM) rose 26% year-on-year to Rs 16,855 crore, reflecting steady demand for formal credit across retail customers and MSMEs.
Its biggest growth engine remained the Direct-to-Customer (D2C) business, where AUM jumped 51% to Rs 10,766 crore. The segment now accounts for nearly 64% of Northern Arc's total lending portfolio.
During the quarter, the company originated loans worth Rs 8,595 crore, pointing to continued momentum in credit demand.
The performance also highlights how India's lending landscape is evolving. Rather than competing with fintech firms, many NBFCs are increasingly partnering with them to reach borrowers who have traditionally had limited access to formal credit.
Northern Arc said it now works with 57 digital partners, alongside its branch network, to offer loans to retail customers, MSMEs and rural borrowers while also supporting other lending institutions.
Management remains optimistic
Managing Director and CEO Ashish Mehrotra said the company crossed the Rs 10,000-crore milestone in its D2C lending portfolio during the quarter while continuing to improve asset quality.
He said Northern Arc will continue to focus on disciplined underwriting, portfolio diversification and prudent risk management to support long-term growth.
At the same time, Mehrotra said the company remains watchful of external risks, including geopolitical tensions in West Asia and the potential impact of El Niño on the monsoon, but believes its diversified business model leaves it well placed to navigate these challenges.
A growing role in India's credit market
As digital lending becomes more mainstream, technology-enabled NBFCs are playing a bigger role in expanding access to credit, particularly for underserved borrowers.
Northern Arc said it has facilitated nearly Rs 2.5 lakh crore in financing, reaching more than 140 million people. Across lending and fund management, its platform now manages nearly Rs 19,843 crore in assets.
The company's latest results suggest that as fintech adoption deepens and digital credit demand continues to rise, diversified lenders such as Northern Arc are well positioned to benefit from India's next phase of credit growth.
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