Banks, NBFCs continue to battle rising stress in unsecured loans in Q1
Notably, the pockets of unsecured stress were seen in various segments such as microfinance, retail commercial vehicle, MSME (micro, small, and medium enterprises) and personal loans and credit cards, according to bankers' post-earnings analyst calls in recent days.
Add to that the cyclical impact of higher farm loan slippages, and most lenders saw elevated provisions for potential loan losses and credit cost weighing on their balance sheet during the three months through June.
'Lenders are still cautious amid the asset quality stress in unsecured segment, which is reflected in slow loan growth in this segment. This continues to tighten liquidity for the borrowers and their ability to refinance the existing loans, which in turn is leading to asset quality stress for lenders. The big challenge for the lenders is assessment of income," said Anil Gupta, senior vice president, Icra.
The country's largest private sector lenders such as HDFC Bank, ICICI Bank and Axis Bank highlighted a seasonal jump in agriculture slippages. Axis Bank was also an outlier in terms of bad-loan provisions, which surged due to a shift in its classification methodology for certain loan segments such as retail cash credit and one-time settlement of stressed loans.
While Axis Bank said that the shift in methodology was to align the bank's stress recognition as per industry best practices, the country's largest consumer finance lender Bajaj Finance reported a substantial rise in delinquencies in MSME and business banking loans for the first time, besides the auto finance portfolio.
'MSME business has shown some strain since February so it's coming a little too suddenly. We've taken a whole host of actions to prune business. It's likely that both these businesses will grow a lot more slowly in the current year," Rajeev Jain, vice-chairman, Bajaj Finance, said in a post-earnings call on Friday.
'Credit costs were principally elevated in two-wheeler and three-wheeler business, which is a winding down business. That's a good news. The captive book has given us a lot of trouble, or continues to give us trouble," Jain added.
However Shriram Finance was an outlier, seeing a sequential drop in credit cost to 1.9% in the first quarter from 2.4% in the preceding three months.
'The questions from investors have been that their numbers always come with a lag and hence we are not confident," said Suresh Ganapathy, managing director of Macquarie Research. "Plus, the guidance on margins and consequent delivery of the same has been a disappointment, as per investors."
Loan jolt
Banks such as IDFC First Bank, Kotak Mahindra Bank and Bandhan Bank reported weaker profitability on the back of a rise in microfinance slippages. The management of these banks said that while stress in the sector is expected to remain elevated in the current quarter, it seems to have peaked.
As such, lenders highlighted early signs of easing and said that they expect the asset quality of the portfolio to start improving Q3 (October-December) onwards.
'The MFI book is a typically 24-30-month kind of book and therefore, it obviously runs off pretty fast. Currently, the new disbursements we are doing is in about the same level of run-offs. So the book will kind of stabilise and start climbing again once disbursements pick up," Kotak Bank's managing director and chief executive officer Ashok Vaswani said on 26 July.
Kotak Bank and HDB Financial, the NBFC arm of HDFC Bank, also flagged a rise in commercial vehicle slippages, which the bank attributed to overall macro-economic slowdown, especially in the logistics and infrastructure sectors, and delayed payments from central and state governments.
Some large banks such as HDFC Bank and Bank of Baroda also made additional prudent provisions in order to beef up their buffers. HDFC Bank and ICICI Bank said that, outside of the agriculture loan book, they are bracing for the possibility of asset quality worsening through the rest of the year.
'The credit cost continues to be benign, and some point in time, it will revert to the mean. What that means is a moot point, and how long it takes is also a moot point, but as of now, it continues to be benign and healthy," HDFC Bank's chief financial officer Srinivasan Vaidyanathan said in a post-Q1 analyst call.
ICICI Bank's finance chief Anindya Banerjee said while the current sort of credit behaviour and asset quality is extremely benign, the bank will 'probably see some increase going forward". 'Credit costs today are negligible. So, they may go up slightly," he said in the analyst call.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
India Today
41 minutes ago
- India Today
Not acceptable: Top Trump aide accuses India of financing Russia's war in Ukraine
A top aide to US President Donald Trump criticised India for buying Russian oil, accusing the country of indirectly funding Russia's war in Ukraine. This comes as the Trump administration intensifies pressure on nations that continue purchasing oil from Miller, one of Trump's most influential advisors, said that Trump clearly believes India should stop buying Russian oil. "What he (Trump) said very clearly is that it is not acceptable for India to continue financing this war by purchasing oil from Russia," Miller said on Sunday Morning seemed surprised at the scale of India's oil trade with Russia. On Fox News, he said, "People will be shocked to learn that India is basically tied with China in purchasing Russian oil. That's an astonishing fact." Despite the US pressure, India has shown no sign of stopping its purchases. According to the news agency Reuters, Indian government sources said they will continue to import oil from Miller tempered his criticism by noting Trump's relationship with Indian Prime Minister Narendra Modi, which he described as "tremendous."TRUMP SLAPS TARIFFS ON INDIAOn July 30, Donald Trump announced a 25 per cent tariff on Indian goods and warned of potential penalties over India's purchase of Russian arms and oil. Immediately after the tariff announcement, Trump launched a blistering attack on New Delhi's ties with Moscow, dismissing both countries as "dead economies" and bluntly stating that he "does not care" what India does with has said he would consider imposing steep tariffs -- as high as 100% -- on imports from any country that continues to purchase oil from Russia unless Russia agrees to peace deal with TRADE WITH MOSCOW POINT OF IRRITATION: RUBIOWhile US Secretary of State Marco Rubio also criticised India's growing ties with Moscow. He called India a "strategic partner" but said its ongoing oil trade with Russia is a "point of irritation" in US-India imports of Russian oil have grown rapidly over the past few years. According to Reuters, before the Ukraine war in 2021, only 3% of India's oil came from Russia. That number has now jumped to between 35% and 40% of its total oil imports.- EndsWith inputs from Agencies Must Watch
The Hindu
an hour ago
- The Hindu
The ‘right to repair' must include the ‘right to remember'
In May 2025, the Indian government took a significant step toward promoting sustainable electronics. It accepted a report proposing a Repairability Index for mobile phones and appliances, ranking products based on ease of repair, spare part access, and software support. New e-waste policies now include minimum payments to incentivise formal recycling. These are timely moves. But as India takes steps toward making repair a consumer right, we must also treat it as a cultural and intellectual resource — a form of knowledge that deserves preservation and support. India's digital and Artificial Intelligence (AI) policy landscape is evolving rapidly. Initiatives such as Digital Public Infrastructure (DPI) and the National Strategy on Artificial Intelligence (NSAI) emphasise innovation, data-driven governance and economic efficiency. Yet, the systems that quietly sustain everyday life — especially the informal repair and maintenance economy — remain largely invisible in digital and policy frameworks. In an age of cloud backups and algorithmic processing, it is easy to forget the value of knowledge that cannot be codified. Much of India's repair expertise lives in muscle memory, quiet observation, and years of hands-on improvisation. This tacit knowledge is vital to India's material resilience. From mobile fixers in Delhi's Karol Bagh to appliance technicians in Chennai's Ritchie Street, repairers keep devices working well past their planned obsolescence. 'If we don't fix it, who will?' says a mobile repairer in Ritchie Street. 'People throw things out. But we see what can be made new.' Their tools may be modest and their workshops discreet, but their work reflects deep ingenuity. They restore devices not by consulting manuals, but by diagnosing faults through sensory cues, reusing components, and adapting creatively to constraints. Yet, this ecosystem is gradually eroding. As product designs become less repairable and consumer habits shift toward disposability, informal repairers find themselves increasingly locked out of markets, of skilling programmes, and of policy attention. What risks being lost is not only economic opportunity but also a vast, undocumented reservoir of knowledge that has long supported India's technological resilience. Also Read | India's rising e-waste, the need to recast its management Why tacit knowledge matters 'I learnt by watching my uncle,' says an appliance repairer in Bhopal. 'He never explained with words. He just showed me once, and expected me to try. That's how we pass it on.' Tacit knowledge refers to forms of skill and intuition that are difficult to formalise. In India's repair economy, this expertise is typically passed down through mentorship, observation, and repetition — not through formal training or certification. It is inherently adaptive and context-sensitive, qualities that structured digital systems, including AI, often struggle to replicate. As AI advances, it increasingly draws on insights shaped by this kind of labour. However, mechanisms to acknowledge or equitably involve the contributors of this knowledge are still evolving. The result is a growing imbalance: AI systems continue to improve, while the communities enabling that learning often remain unrecognised. Globally, the Right to Repair movement has gained momentum. The European Union recently introduced rules requiring manufacturers to provide access to spare parts and repair documentation. In India, the Department of Consumer Affairs launched a Right to Repair framework in 2022, followed by a national portal in 2023 covering electronics, automobiles, and farm equipment. Meanwhile, the United Nations Sustainable Development Goal 12 promotes repair as part of responsible consumption. India now has the opportunity to lead by recognising repair not just as a service but also as a form of knowledge work. The blind spot in India's digital policy In 2021-22, India generated over 1.6 million tonnes of e-waste, becoming the world's third-largest producer. The E-Waste (Management) Rules, 2022 introduced Extended Producer Responsibility (EPR) — a principle that makes manufacturers responsible for post-use product management. However, while these rules encourage recycling, they make only a passing mention of repair as a preventive strategy. National skilling programmes such as the Pradhan Mantri Kaushal Vikas Yojana (PMKVY) focus on short-term certifications for formal industrial roles. Repair work, which requires improvisation, diagnostic skill and creative reuse does not easily fit this framework. Similarly, the National Education Policy (NEP) 2020 celebrates Indian knowledge traditions and experiential learning but offers little guidance on how to support or transmit hands-on repair expertise. Campaigns such as Mission LiFE (LiFEStyle For Environment) promote repair and reuse, but complementary efforts are needed to support the workers who make such sustainability practices possible. While policies now champion circularity, they risk leaving behind the very workforce whose skills make it real. As sustainability becomes a national priority, policymakers and technologists are reconsidering how we design, discard, and extend the life of everyday products. One emerging idea in research is 'unmaking' — the process of taking apart, repairing or repurposing devices after their first use, revealing design flaws and opportunities for reuse. Breakdowns and repairs are not failures; they are feedback loops and sources of practical insight. A discarded circuit board can become a teaching tool. A salvaged phone part can restore someone's access to work or school. A broken appliance can be repaired and reused. Informal repairers perform this work daily. Their labour sits at the centre of the circular economy, where reuse is not an afterthought but a design principle. Recognising them as stewards of sustainability — not marginal figures — can reshape how we think about environmental and digital innovation alike. AI-enabled solutions for repair justice India's culture of jugaad and frugality long pre-dates today's tech-forward policies. Repairers have always adapted across devices and decades, with minimal support. As the country invests in AI infrastructure and digital public goods, it must align these ambitions with the ground realities of repair. Most modern gadgets are built for compactness and control, not repair. According to a 2023 iFixit global report, only 23% of smartphones sold in Asia are easily repairable due to design constraints. To change this, design norms and procurement policies must include repairability from the start. To make technology genuinely sustainable, public policy must consider not only how products are manufactured and used but also how they break down, are repaired, and find new life. A shift toward designing for 'unmaking', where disassembly and repair are anticipated from the outset, should inform both hardware standards and AI-integrated systems. This transition will require coordinated institutional action. The Ministry of Electronics and Information Technology can embed repairability criteria into AI and procurement policies. The Department of Consumer Affairs could expand the Right to Repair framework to include product classification and community involvement. Platforms such as e-Shram, under the Ministry of Labour and Employment, can formally recognise informal repairers and connect them to social protection and skill-building schemes. The Ministry of Skill Development and Entrepreneurship can consider training programmes to account for the tacit, diagnostic nature of repair work, which does not conform to standardised industrial templates. To support this, decision trees can help codify typical repair pathways, while Large Language Models can capture, summarise, and translate tacit repair narratives into structured, shareable knowledge, enabling broader learning without stripping local context or expertise. Supporting this ecosystem is not merely a question of intellectual property or technical efficiency. It is about valuing the quiet, embodied labour that sustains our digital and material lives — an essential step toward a just, repair-ready technological future. As philosopher Michael Polanyi observed, 'We know more than we can tell.' By choosing to remember what cannot be digitised, we preserve the human wisdom essential to a meaningful technological future. Kinnari Gatare is a researcher in Human Computer Interaction (HCI) and a former UX Design Consultant, National Programme on Technology Enhanced Learning (NPTEL), Indian Institute of Technology Madras
Time of India
an hour ago
- Time of India
In Ludhiana, MSME body calls for urgent tooling reforms to curb imports, boost local innovation
1 2 Ludhiana: A delegation from the Chamber of Industrial & Commercial Undertakings (CICU) has urged the Indian government to modernise ageing industrial infrastructure and simplify complex support schemes that, they say, are stifling growth in the country's vital micro, small and medium enterprise (MSME) sector. Led by CICU president Upkar Singh Ahuja, the delegation met with S.C.L. Dass, Secretary of the Ministry of MSME, at the Central Tool Room (CTR) in Ludhiana to push for urgent reforms. The discussions focused on revamping the CTR—once a symbol of industrial modernity in the 1980s—now struggling to meet the evolving needs of high-end manufacturing. "When CTR was established, it uplifted Ludhiana's industrial ecosystem by supplying skilled labour and modern tooling solutions," Ahuja said. "Today, it lacks the advanced machinery and material capabilities needed for new-generation industries." Citing the example of reflectors—critical components for the automotive and lighting industries—Ahuja noted that despite rising domestic demand, India continues to import around ₹2,000 crore worth annually. "We must invest in institutions like CTR to build indigenous capacity," he said. The CICU also flagged the overly bureaucratic nature of MSME support schemes. Many smaller enterprises, they said, lack the manpower or expertise to navigate them, effectively locking them out of essential government support. Ahuja urged the ministry to streamline these schemes, making them more practical and accessible for micro and small businesses that form the backbone of regional economies like Ludhiana. Secretary Dass acknowledged the concerns and assured the delegation of the ministry's commitment to strengthening the MSME sector. "Ludhiana's role in India's industrial growth is undeniable," Dass said, as quoted by Ahuja. "The government remains focused on modernising institutions such as the Central Tool Room and supporting structural reforms." Get the latest lifestyle updates on Times of India, along with Friendship Day wishes , messages and quotes !
