Credit Solutions

Northern Arc has been historically providing funding from its balance sheet to Originator Partner for onward lending to retail customers.

The Company supports partners through a wide range of funding structures tailored to their capital requirements and business models.

These include balance sheet lending and investments in debt securities issued by Originator Partners to finance their retail lending activities. The financing instruments comprise loans, non-convertible debentures (NCDs), market-linked debentures, commercial papers (CPs), and other structured debt solutions. In addition, Northern Arc invests in retail loan portfolios originated by its partners through portfolio. These transactions involve a hypothecation of the borrower’s assets to the extent of 110-120% of loan by the Originator Partners to ensure fulfilment of the debt obligation upon default in payment by the borrower to minimise exposure.

Northern Arc started its journey by partnering with Microfinance Institutions (MFIs), and since then, it has progressively expanded into sectors such as MSME, Consumer Finance, Vehicle Finance, Affordable Housing, and Agriculture. This calibrated diversification has enabled the Company to build a well-balanced lending portfolio, strengthen portfolio resilience, and cater to the evolving credit needs of the underserved segments across India.

Going forward, the Company intends to use its balance sheet primarily to establish new partner relationships, while the incremental funding requirements of existing Originator Partners will increasingly be met through its comprehensive credit solutions approach by leveraging Funds, Placements and Altifi platform, creating a scalable and capital-efficient growth model, which is capital light and fee-accretive.

Northern Arc remains committed to enabling credit for its Originator Partners beyond balance sheet lending through its Placements business. Since inception, Northern Arc has facilitated debt transactions aggregating INR 1.3 Lakh Crore, reinforcing its position as a trusted intermediary that efficiently channels capital to underserved sectors of the economy.

The Company enables financial institutions and corporates to access capital from a diversified network of investor partners, including banks, development finance institutions, domestic and offshore funds, foreign banks, insurance companies, and other institutional investors.

Northern Arc also plays a pivotal role in deepening the securitisation market and broadening access to capital for its partners. Drawing on its deep domain expertise in Structured Finance, strong market positioning, technology-driven insights, innovative structuring capabilities, and long-standing relationships with Originators and Investors, the Company structures and facilitates tailored PTC transactions aligned with the evolving requirements of its stakeholders.

Through these capabilities, Northern Arc continues to deepen capital market access for its Originator Partners, diversify their sources of funding, and facilitate the efficient flow of capital across the credit ecosystem.

Securitisation continued to dominate, contributing to ~67% of total placement volumes of INR 11,834 Crore, with PSL-driven demand of about ~25% of total volume, particularly for MFI-originated assets.

While the Company maintains a diversified investor base comprising offshore investors, domestic banks, NBFCs, PSUs, Mutual Funds and wealth firms, domestic banks and NBFCs remained the primary drivers of placement volumes in FY26 contributing approximately 68% of the total volume. Domestic alternative investors, including AIFs, private credit funds, and wealth platforms, continued to expand their participation, accounting for around 14% of placements, with a preference for higher-yield structured opportunities. Participation from offshore investors remained relatively muted during the year, reflecting heightened geopolitical uncertainty and a cautious global investment environment.

Subdued foreign participation

Northern Arc’s Credit Solutions (Placements) business is well diversified across six sectors like Microfinance, MSME, Consumer Finance, Vehicle Finance, Affordable Housing Finance, and Agriculture Finance. This diversified sectoral mix enables the Company to cater to a broad spectrum of credit needs, reduce concentration risk, and provide investors with access to high-quality credit opportunities across India’s underserved economy.

During FY26, placement volumes in the Microfinance sector - one of the largest contributors to the business - were impacted by the industry’s over-leveraging challenges, resulting in a moderation in transaction volumes. However, the Company’s diversified sectoral presence helped offset the impact and supported overall business resilience.

During the year, we strengthened our credit intermediation platform by onboarding 24 new investors and expanding our reach into newer investor segments, including Alternative Investment Funds (AIFs), corporate treasuries, co-operative banks, Small Finance Banks (SFBs), and provident funds. This enhanced investor diversification and improved monetisation, resulting in fee income realisation increasing from 0.21% in FY25 to 0.27% in FY26.

Northern Arc’s Fund Management business complements its Credit Solutions platform by channelling capital into carefully selected financial institutions and corporates that align with the thematic investment objectives of its funds.

The Northern Arc Group’s fund management business is undertaken through its wholly-owned subsidiary, Northern Arc Investment Managers (NAIM), which manages thematic credit funds focussed on delivering long-term value for investors while expanding access to credit across underserved sectors.

NAIM has established a strong fiduciary track record, with all its funds structured as clean, performing credit vehicles without carry structures, ensuring alignment with investor interests while delivering superior risk-adjusted returns. The funds primarily invest through non-convertible debentures (NCDs), supporting prudent risk management, predictable cash flows, and portfolio resilience.

Since inception, NAIM has managed 12 Category II AIFs and three PMS schemes, deploying over INR 15,000 Crore across more than 250 portfolio companies, while serving over 1,300 unique investors. The platform has successfully exited six funds, with each delivering returns ahead of its targeted performance, reinforcing NAIM’s track record as a trusted manager of private credit capital.

nPOS (Nimbus Partner Origination System) is Northern Arc’s API-based, cloud-native loan origination platform that enables seamless integration with lending partners for on-lending and co-lending. Leveraging machine learning for credit underwriting, the platform facilitates efficient loan origination, decision-making, and partner connectivity. With over five years of operating history, nPOS is a proven and scalable platform that has continuously evolved to incorporate changing regulatory requirements and industry best practices. In addition to supporting Northern Arc’s own lending operations, the Company offers nPOS as a Software-as-a-Service (SaaS) solution to Originator Partners and Banks, enabling them to efficiently originate and manage co-lending portfolios while enhancing operational efficiency and compliance.

Altifi is an innovative retail bond platform that enables retail investors to access a diverse range of fixed-income securities. Today, Altifi hosts both proprietary and third-party investment products, providing a wider range of investment opportunities to its ~95,000 registered customers. The platform also strengthens Northern Arc’s credit ecosystem by expanding its capital-raising capabilities. Through Altifi, the Company can connect retail investors with fixed-income investment opportunities issued by its Originator Partners, thereby diversifying funding sources and enabling more efficient access to capital.

NuScore is an enterprise-grade Analytics-as-a-Service platform for financial institutions, combining advanced machine learning with deep industry expertise. It delivers intelligent scorecards, instant insights, and borrower behaviour analysis while ensuring a privacy-first approach through anonymised data. With custom-built models, robust governance, and real-time monitoring, NuScore enables secure, scalable, and adaptive decision-making across the credit lifecycle. The result: faster, compliant, and customer-centric lending decisions that reduce risk, accelerate growth, and sustain long-term performance.