From NBFC Crises to Capital Markets: How Analysts Describe India’s Shift Toward Market-Based Corporate Financing in 2026

The relationship between Indian corporates and the banking system has shaped industrial growth for over a century. For decades, companies sought term loans from banks, managed working capital through credit lines and relied on relationship-driven lending for capex. Analysts examining long-term patterns often describe this as a bank-centric financing model one where banks served as the primary channel for corporate debt. However, recent years have ushered in a different narrative. A noticeable shift has emerged in how corporations approach capital formation, and industry commentary increasingly points to a decisive migration toward capital market financing.

Discussions across market research indicate that this shift is not temporary or opportunistic. It reflects structural learning from past disruptions, especially from episodes where dependency on bank or NBFC channels concentrated risk. As India enters 2026, analysts note that corporates appear to be systematically rebalancing their funding mix, incorporating greater use of bonds, commercial paper, securitised instruments and other market-based tools. This shift is described not as a rejection of banks, but as an expansion of corporate funding pathways aimed at reducing concentration risk and improving stability.

The NBFC Crisis: Insights from a Transformative Disruption

To understand why India’s corporate financing landscape is evolving, analysts frequently reference the NBFC crisis of 2018–2019 as a turning point. The sequence began when Infrastructure Leasing & Financial Services (IL&FS), a major financial conglomerate with substantial balance-sheet exposure, experienced severe liquidity strain. According to industry assessments, IL&FS had accumulated debt exceeding ₹90,000 crore and was deeply interconnected with banks, NBFCs and institutional investors. When repayment delays surfaced, rating downgrades intensified liquidity pressures, creating a cascading impact.

Within months, Dewan Housing Finance Limited (DHFL), another large player, faced its own repayment challenges. As concerns broadened, short-term market instruments such as commercial paper experienced heavy redemption pressure. Analysts examining this period note that certain debt funds faced sharp declines in net asset values during the height of the stress.

One of the most widely discussed issues from this event was the asset–liability mismatch inherent in several NBFC business models. Many institutions funded long-duration assets such as housing loans or infrastructure exposure through short-term borrowing. This mismatch functioned adequately as long as refinancing remained available. Once markets tightened, however, refinancing constraints exposed structural vulnerabilities. The speed at which liquidity stress travelled across interconnected entities highlighted the risks associated with funding chains heavily reliant on intermediaries rather than diversified sources.

Industry observers often point out two key lessons many corporates appeared to draw from this episode. First, dependence on layered intermediation—where credit flowed through NBFCs financed by banks—can amplify systemic exposure. Second, entities with access to broader capital market instruments appeared better positioned to withstand refinancing volatility. These observations contributed to a wider shift in corporate thinking regarding financing strategy.

A Structural Shift in Corporate Fundraising Patterns

Industry datasets reflect noteworthy changes in how companies fund themselves. Analysts tracking fundraising patterns highlight that the proportion of corporate financing sourced from banks has declined meaningfully in recent quarters. While banks remain core lenders for working capital, trade finance and retail segments, the share of large-ticket corporate borrowing sourced directly from capital markets has expanded.

One set of data often referenced in research shows a steady drop in the percentage of total corporate fundraising derived from bank credit across consecutive fiscal periods. Market commentary notes that the contribution of bank lending to overall corporate financing has compressed significantly over the past two years. At the same time, corporate bond issuance has climbed, with annual fundraising via bonds reaching levels characterised by analysts as historically high.

The outstanding stock of corporate bonds has grown substantially over the past decade. Analysts reviewing long-term trends remark that corporate bond volumes have increased multiple times relative to early 2010s levels. Forecasts in industry research suggest continued expansion as more corporations integrate market instruments into their financing frameworks.

Another commonly discussed metric is the ratio of corporate bond financing to bank credit. This ratio, historically low in India compared to global benchmarks, has been trending upward as capital markets mature and become more accessible. Regulatory initiatives, technological innovation and shifts in corporate preferences have all been cited as contributing forces.

Cost Dynamics and Why Corporates Explore Market-Based Funding

Analysts frequently highlight borrowing-cost dynamics as a major factor shaping funding decisions. During periods where policy rates decline, transmission through bond markets tends to occur relatively quickly. Yields on corporate bonds, especially for higher-rated issuers, often adjust sooner than bank lending benchmarks. Commentary on recent rate cycles suggests that several corporates observed more attractive pricing in bond markets than in traditional bank loans, prompting them to consider diversified funding channels.

One analysis noted that during a phase where policy rates had been reduced, lending rates based on the Marginal Cost of Funds-Based Lending Rate (MCLR) moved more gradually. In contrast, yields on certain categories of corporate bonds compressed more swiftly. For well-rated issuers, this presented a period where market-based funding offered competitive or lower effective costs. Observers emphasise that such windows reinforce the value of maintaining access to multiple financing pathways rather than relying on a single channel.

Beyond pricing considerations, market-based funding offers structural advantages highlighted in corporate finance commentary. Bond issuances typically involve standardised covenants, broad investor participation and transparent pricing. Companies engaging directly with diversified investor groups often benefit from reduced reliance on any single lending institution. Analysts note that this diversification can help mitigate the impact of periods when banks adopt more conservative lending stances due to regulatory or macroeconomic factors.

The Evolving Role of Banks in the New Funding Landscape

Despite the growing prominence of market instruments, analysts consistently clarify that banks remain integral to India’s financial system. The shift described in research does not suggest corporates abandoning banks; instead, banks are focusing increasingly on segments where they possess established strengths.

These include:

• Retail credit
• Mortgages and vehicle finance
• Working capital lending
• SME and MSME credit
• Transaction banking services

Analysts observing this rebalancing note that banks may benefit from focusing on areas where asset-liability profiles are more manageable and where credit-risk dispersion is broader. Meanwhile, capital markets are absorbing a larger portion of long-term financing and project funding needs—areas that traditionally exposed banks to longer-duration risks.

Industry commentary anticipates that bank lending to corporates will continue, but with a stronger focus on short- to medium-term products and relationship-driven services. Meanwhile, long-duration corporate financing is increasingly discussed through the lens of bond issuance, securitisation structures and other market vehicles.

Regulatory and Market Infrastructure Supporting the Shift

The transition toward market-based financing has been supported by a series of regulatory developments aimed at improving transparency, participation and liquidity. Analysts studying these reforms often highlight several initiatives:

• Reduced minimum investment thresholds for bonds
• Enhanced disclosure norms through centralised databases
• Platform-based mechanisms that provide easier access to market instruments
• Development of new products such as corporate bond index derivatives
• Evolving guidelines that encourage deeper participation across investor categories

These reforms are designed to strengthen the foundation of India’s corporate bond ecosystem. Combined with improvements in digital infrastructure, they have made it easier for investors including individuals to evaluate issuer fundamentals, compare yields and transact efficiently. Analysts frequently note that such structural changes expand the potential investor base, which in turn enhances liquidity and pricing transparency.

Digital Platforms and Widening Retail Participation

As technology reshapes financial markets, analysts highlight that digital platforms have been instrumental in simplifying access to corporate bonds. Traditional barriers—such as high minimum investment sizes and limited distribution networks—have reduced significantly. Platforms offering low minimum investment sizes and transparent pricing have supported broader adoption of fixed-income products among retail participants.

Commentary on market behaviour indicates growing retail interest in investment-grade bonds across a range of tenors and sectors. As investors gain access to tools that display ratings, maturity schedules and yield structures, they can evaluate fixed-income instruments with greater clarity. This has contributed to the broader trend of diversified participation in capital markets.

Platforms that curate bond offerings, display detailed risk disclosures and streamline purchase processes have been noted for assisting retail users in navigating the fixed-income landscape. Analysts view this as part of a larger evolution where technology reduces fragmentation and supports more accessible market participation.

Altifi: Bridging Retail Access to Corporate Bond Markets

For individual investors seeking to participate in this capital market transition, Altifi represents a compelling platform enabling participation. Backed by Northern Arc Capital, Altifi has democratised corporate bond investing by combining minimal fees (zero purchase fees), low investment minimums (₹10,000), and transparent yield comparison across ratings categories. The platform has attracted nearly 59,000 registered users deploying over ₹1,220 crore collectively, demonstrating the scale of retail interest once accessibility barriers are removed.

From a corporate perspective, Altifi and competing platforms expand the potential investor base for corporate bond issuances. Where corporates previously accessed capital through institutional wholesale dealers and high-net-worth individual networks, they now reach tens of thousands of retail investors seeking diversified fixed income exposure. This diversification of investor base itself improves market resilience. When institutional investors dominate corporate bond ownership, as was previously the case, market disruptions can force rapid selling cascades. Retail investors with longer investment horizons and lower propensity toward panic-driven sales provide more stable demand.

Sector Trends Within the Shift Toward Bond Financing

Industry analyses indicate that not all sectors have transitioned toward bond financing at the same pace. Sectors with long-term financing needs—such as infrastructure, utilities, renewable energy and large-scale industrial projects—feature prominently in bond-market activity. These sectors require substantial, long-duration capital, making bond markets an important source of funding.

Financial institutions, including non-bank lenders and housing-finance companies, also utilise bond markets extensively as part of their funding structure. Analysts note that these entities draw from a broad investor base to support their lending portfolios, contributing to the steady growth of the bond market.

Conversely, sectors with shorter cash-flow cycles—such as retail, hospitality or services—may continue to rely more heavily on bank financing. However, as capital markets deepen further, industry observers anticipate continued growth in the number of sectors participating in bond issuance.

Looking Toward 2026: A Landscape Shaped by Market-Based Financing

Research discussions examining the evolving funding environment highlight several themes shaping expectations for 2026. As interest-rate volatility moderates, companies appear to be evaluating more stable long-term financing strategies. Bond-market liquidity has shown signs of strengthening, supported by diversified investor participation. Regulatory and infrastructure reforms continue to encourage deeper capital-market development.

Analysts describe these elements collectively as contributing to a broader rebalancing within India’s financial ecosystem. Over time, this transition may help distribute credit risk more evenly across lenders, investors and institutions. Companies with diversified access to debt capital whether through banks or markets may be able to navigate periods of volatility with greater flexibility.

These perspectives do not represent forecasts but reflect themes emerging from analyses of recent trends, market behaviour and regulatory progress.

Conclusion: An Evolving Financial Architecture

The shift from a bank-dominated financing model toward a more market-integrated framework reflects an important evolution in India’s economic architecture. Analysts studying this transition note that it supports a diversified and resilient financial system, enabling corporates to reduce dependency on singular funding channels. Banks remain essential, especially in segments aligned with their strengths, while capital markets increasingly serve as an important avenue for long-term and large-scale financing.

This evolution has been shaped by experience, reinforced by reforms and accelerated by technology. As India’s financial landscape continues to develop, corporate funding strategies appear to be moving toward a more balanced structure, where market access plays a central role alongside traditional banking relationships.