Northern Arc Capital is a non-bank lender that acts as a financial bridge, connecting India’s underserved households and small businesses to institutional capital through a hybrid model of direct lending and a credit platform for other lenders. Born in 1989 and reoriented toward credit in 2009, the company has spent over 15 years navigating every major disruption in Indian finance - from demonetisation to the IL&FS crisis and the pandemic - while building a data engine that now holds over 50 million loan records. The recurring approach is to use its own balance sheet to lend directly where it sees the best risk-adjusted returns, while simultaneously offering the technology, scoring, and capital-placement tools that other lenders need to reach the same customers - a flywheel where every loan, whether on its own books or a partner’s, feeds the data that sharpens its underwriting. # Business segments Three engines built on the same data backbone - a fast-growing direct-lending book that now dominates the balance sheet, a credit-solutions platform that places and manages capital for hundreds of originator partners, and a fund-management arm that invests in the same ecosystem. ## 1. Direct-to-Customer Lending: where the balance sheet meets the end borrower **The company lends its own money directly to micro-enterprises, consumers, and rural households, and this segment has grown from a fifth of the loan book to nearly three-fifths in five years, pulling overall margins sharply higher.** - **Secured loans to small businesses are the anchor** - the MSME book, at roughly INR 3,700 crore, is built on loans against property with an average ticket of INR 11-15 lakhs, a conservative loan-to-value of 48%, and yields of 17%-19%, giving it a secured foundation that grew at a 38% five-year compound rate. - **Consumer loans are the volume play** - over INR 5,000 crore in AUM serves more than 2.4 million customers through personal loans and vehicle finance sourced digitally and through 28 fintech partners, with about 70% of borrowers coming back for a second loan, which signals both underwriting quality and customer stickiness. - **The branch network is the distribution muscle** - 372 physical branches and 55 digital partners put the company within reach of customers across 28 states and 680 districts, so it can originate loans in places where traditional banks have little presence. ## 2. Credit Solutions: the platform that powers other lenders **Instead of only lending its own money, Northern Arc also provides financing, capital-raising, and technology tools to 368 originator partners - NBFCs, microfinance institutions, and fintechs - earning fees and interest without always taking the end-credit risk.** - **Lending to other lenders generates secured yield** - the INR 6,802 crore intermediate-retail book provides term loans and buys loan pools from partner institutions, with the underlying retail receivables serving as collateral at 110%-120% cover and yielding roughly 13.0%-13.5%. - **Placement is a capital-light fee engine** - the company connects originator partners to over 200 institutional investors, including Goldman Sachs, SBI, and Citi Bank, arranging INR 11,834 crore of securitisation and bond transactions in FY26 while carrying zero credit risk itself, and the fee rate improved from 0.21% to 0.27% year-on-year. - **The partner base is deliberately high-grade** - 90% of the 368 originating partners are rated BBB and above, and roughly 95% maintain capital adequacy above 20%, so the platform is not a lender of last resort for weak institutions but a funding and technology channel for viable ones. ## 3. Fund Management: investing alongside the ecosystem **Through its wholly owned subsidiary, Northern Arc runs performing-credit funds that invest in the same originator partners and mid-market companies it already knows intimately, earning management fees and building a track record where every exited fund has beaten its stated return target.** - **A decade of fund management without a loss** - twelve funds have been launched, six fully exited, and all six delivered returns above their targets, with over INR 12,000 crore deployed and a 14.57% return track record across the platform. - **The investor base is broad and sticky** - more than 1,500 investors have committed capital across six active funds and two PMS schemes, with total assets under management of INR 3,092 crore as of March 2026. # Risk and data infrastructure **A 100-person risk team, a proprietary data lake of over 50 million loan records, and more than 30 machine-learning underwriting models form the central nervous system that serves every business line - direct lending, partner scoring, and fund investments alike.** - **Underwriting is automated and customised** - the Nu Score algorithm, commercially launched in FY23, has already processed over 2.5 lakh loan assessment requests from external financial institutions, while internally it scores 100% of rural microfinance loans and feeds the consumer and MSME decision engines. - **Collections are end-to-end and increasingly AI-driven** - the process runs from pre-due digital reminders through tele-calling at 0-15 days past due, on-field collection at 15-plus days, and legal recovery at 90-plus days, all managed on an AI-native platform with omni-channel payments built in. - **Provisioning is conservative by design** - the policy mandates a 100% provision on every unsecured loan the moment it crosses 90 days past due, which helps explain why total gross non-performing assets sit at 1.2% with Stage I assets at 97.3% of the on-book portfolio. # Group structure and partners **Northern Arc is a listed holding company with five subsidiaries that extend its reach into fund management, securities distribution, investment advisory, and rural microfinance, and it has just signed a strategic partnership with YES BANK to distribute its credit and technology products through the bank’s network.** - **The subsidiaries are tightly integrated** - Northern Arc Investment Managers runs the AIF and PMS fund business; Northern Arc Securities operates the Altifi bond platform under a SEBI stockbroker licence; Northern Arc Investment Adviser holds a SEBI investment-adviser registration; and Pragati Finserv (90.1% owned) is the rural-microfinance arm with 342 branches. - **A new factoring licence expands the toolkit** - in June 2025, the RBI approved the company to commence factoring, adding a receivable-finance capability that fits naturally with its supply-chain finance and MSME lending. - **The YES BANK partnership opens a distribution highway** - a non-binding memorandum signed in June 2026 envisions routing credit through Northern Arc’s 368 originator partners, embedding its nPOS and NuScore platforms into the bank’s digital architecture, and distributing its investment products and Altifi bonds through the bank’s wealth ecosystem, with the connection facilitated by Sumitomo Mitsui Banking Corporation, a shareholder in both institutions.