CRIF data shows patchy credit recovery as big-ticket loans gain, small borrowers struggle

India’s credit landscape is showing signs of a K-shaped recovery, with high-ticket loans—particularly in home and gold lending—gaining traction, while smaller borrowers continue to face financial stress.To explore the trends shaping this divergence, CNBC-TV18’s Latha Venkatesh spoke with industry leaders — Sachin Seth (Chairman, CRIF High Mark & Regional MD, CRIF India & South Asia), Madhusudan Ekambaram (Founder & CEO, KreditBee Financial Services), Kanika Pasricha (Chief Economic Adviser, Union Bank of India), and Sudipta Roy (MD & CEO, L&T Finance).According to Seth, private sector banks are losing ground in key segments like home loans to public sector counterparts, largely due to pricing pressures and a more risk-averse approach.The latest CRIF report highlights that overall lending activity remained cautious in FY25, with origination growth moderating amid rising affordability concerns and tighter credit conditions.While public sector banks and NBFCs expanded their market share, borrowers showed a clear preference for higher-value loans in response to rising asset prices.
In contrast, demand for small-ticket loans weakened, with elevated delinquency levels adding to the pressure.Below are the edited excerpts of the interview.Q: Sachin Seth, can you begin by telling us the key things, anything surprising that you noticed?Seth: Every time we release this report, there are many things which come complete surprise. This time, I will say there are three, four points. This microfinance issue, or the stress which has been there, I think it has lasted much longer than anybody expected. Every quarter, everybody has been tracking, and we hope that we will recover from that. However, it has lasted much longer. We are seeing some signs of improvement now, as we saw the data last month, but that is one thing which surprised all of us.Second, if you see the share gain by public sector banks and even NBFCs in many of the segments over private sector banks, that has been a big surprise. Because there has been a stronghold of private sector banks in many of the segments, including home loans, credit cards, personal loans, etc., that has been a very, very eye-opening thing, which means that there is systemic change happening in the industry that’s a new thing.The third thing is the amount of focus and thrust being given by the government and multiple ecosystem partners on MSMEs; we were hoping that there could be a lot more adoption. There have been improvements, but I think there’s still a lot more to be done.Also, in consumer durable segments, or other personal loan segments, we see that it’s continued to be dominated by three or four players, primarily NBFC players, which is very, very different compared to other industries. There are only one or two bank players, and NBFCs are doing far better there. So that continues to be there.Q: You have been a veteran player. Anything surprised you, shocked you in the findings of the trends in FY25?Roy: Maybe the pace of slowdown in some places has been a little more than what I estimated, so if you say that is something that I found, probably a little more than my expectations. However, the fact is that from an asset quality point of view, last year was a tough year. Most of the lenders, took up their sort of credit guardrails and coupled on top of it – if you see, from the latter part of 2023, the Reserve Bank of India also started upping its ante on, sort of curbing the runaway growth in unsecured loans, a variety of actions.Now, when the regulator is also pushing you to sort of temper your growth, as well as when you have risk rising on the margin, which the private sector banks with very large unsecured portfolios, credit cards and personal loans portfolios, and then we saw the microfinance, sort of asset quality issues start bubbling in the front from the April of last year – overall, there was a sort of a realisation in the industry that probably, and the froth as we call it, on top of the ecosystem had built to a certain extent that there was a slowdown.Q: I was more surprised by MSME originations falling. It was a good year of growth, the decent year of growth – FY25 that surprised you?Roy: No, it didn’t surprise me, because you have to understand that everything is connected, and MSME also takes unsecured loans. So, the fact is that when you have one part of the sort of ecosystem exhibiting risk, which is in credit cards and many of the MSMEs, especially on their personal or individual capacity, also borrow from the market. The fact is that when you underwrite an MSME loan, you not only underwrite their business, you also underwrite their personnel. And when you see that their personal borrowing facilities are showing signs of stress, the guardrails also go up in MSME lending. Overall, the risk perception of the industry went up, which led to increased sort of credit guardrails across all segments, which led to a sort of secular degrowth in lending.Read Here | PSU Bank shares in focus after these three lenders report healthy business growth in Q1Q: The report says small ticket loans saw slower uptake and higher delinquency pressures, whereas the borrowers seem to have gravitated towards higher ticket loans. Is this saying about a K-shaped recovery? What does this say?Pasricha: It is the high-ticket loans that are gaining momentum, and I will connect with what Sachin talked about. The reason why private sector banks were not growing as much as public sector banks, one of the key areas is home loans. In home loans, what we found is that private sector banks growth is less than 5% if I look at RBI data, I am not quoting from How India Lends report, while public sector banks home loan growth is around 12 to 15% while the accounts, the number of accounts, growth is falling in both segments. But it’s the ticket size of loans that’s rising in public sector banks because private sector banks, as the cycle started to shift towards easing, they didn’t want to get into EBLR-linked loans.In fact, there’s such competition in home loan market that the interest rate bucket for 9% to 11% which had 65% share in FY23, fell to only 40% in FY25 it all shifted to 7 to 9, so private sector banks were not willing to lend there. So, the ticket size of the loans has shifted from the private sector to the public sector, and that too, we have seen it is the higher ticket size loans as part of the K-shaped recovery that are growing more while the smaller ticket size is struggling. It is the shift in wealth effect; it is a shift in the income pyramid as well, and it’s the bottom of the pyramid that’s still struggling with inflation, while the upper end is relatively comfortable.Q: Sachin’s report says early-stage stress showed improvement. Now, does this mean that we are in an improving cycle of bad loans, because early-stage defaults are declining?Ekambaram: Before getting into the report itself, let me talk a little bit about what we saw in the industry as such. If you take Q1 of FY25, which was last year, somewhere in that April, May, June quarter, everyone saw the stress in the unsecured lending space. It could be either a short-term personal loan, a long-term personal loan, or even microfinance that started showing certain stress. Now, it all depended on when each of the company’s stress kinds peaked, when did the risk peak. So most of the NBFCs, when we see that, it peaked by Q2 end in the results, we could see that, or in Q3 somewhere, the risk was peaking. After that, it was always improving. But the stress continued somewhere in the microfinance segment, and people say the peak risk is yet to come out and whatnot. But that is where it has continued as a higher risk within the personal loan segment.Now, specifically coming to, let’s say the fintech segments where we operate what we saw was that the Q2 where the risk peaked at after that it has been in a very much of improving trends or the declining trends is what we have seen, and that’s how the industry benchmarks are also showing. Something from the report, what I have seen is that while a lot has been talked about, there has been a risk that has build-up in the short-term personal loan or the small ticket personal loan. However, if you go a little bit deeper and look at it, less than ₹1 lakh, the risk has not built up. The risk has built up in like ₹2 lakh to ₹10 lakh segment is where we have seen the risk has deteriorated over time. However, less than ₹1 lakh has always been performing well that is what the data shows. However, there has been a lot of narrative, both in the media and everywhere else there, that anything less than ₹50,000 or ₹1 lakh has been more stressful. However, that’s not the case if we just look at the report data, and that has been a pretty good surprising element for me.Read Here | SBI chief says credit revival in sight, but it hinges on capex and sentimentQ: An earlier report had said under ₹50,000 but that was an old report, so maybe things have changed since. Sachin, would you agree with what Madhu say? Will we in FY26 see less stress? The financial stability report that Kanika referred to that gave the impression, especially for NBFCs, that stress will rise from about 2.9% they are expecting the baseline to go to 3.3% but you are seeing some signs of early-stage delinquency falling. What is your best guess that 2026 will be more stressful than 2025?Seth: It is a forward-looking statement, so we always look at the data from the Bureau from the past. However, we are seeing the signs, and we have also compared it with the last two or three years in certain situations. If I stick to the segments, what we have assessed, definitely, we are seeing that certain corrective actions being taken by lenders. Microfinance, we are working very closely with the industry. We are seeing corrective actions and in fact, I can tell you what is not in the report. We have even taken the data from April also, and we are seeing that there is an improvement; decline is happening. We are hoping that when we release the report in June, it will definitely have improvements. So, hopefully that will be better.If we look at personal loans, etc. lot of corrective actions have already been taken by every lender, and there is a very cautious approach so that is being taken care of. People are shifting to asset-based lending and more secure lending. So, there is a lot of talk happening on micro LAP, etc., which are, by design, less sort of risky assets. There is a shift in the industry happening towards that. Even overall lending portfolio, you see the growth which is happening is towards that.The highest growth has been in the gold loan. In fact, if you see the portfolio growth, there has been a decline in almost everything except gold loan, and the RBI has already come out with saying that you need to have even a bureau check there, which most of the people are not doing.With all this, keeping in mind, I think the industry ecosystem, the guardrails, the RBI guidelines, the liquidity, the changes which have been done in the allocation for the MFIs, the measures are being taken.If you keep the portfolio as it is, I can definitely say that this portfolio will improve. The underwriting things are improving. I would say overall, we will definitely have an improvement in the portfolio quality. However, yes, there are new lenders coming into the market. They want to gain more market share. So, there could always be a mixed bag, fair point, but same portfolio, if you keep it definitely, the portfolio is going to become better.
For the entire discussion, watch the accompanying videoIndia’s credit landscape is showing signs of a K-shaped recovery, with high-ticket loans—particularly in home and gold lending—gaining traction, while smaller borrowers continue to face financial stress.
To explore the trends shaping this divergence, CNBC-TV18’s Latha Venkatesh spoke with industry leaders — Sachin Seth (Chairman, CRIF High Mark & Regional MD, CRIF India & South Asia), Madhusudan Ekambaram (Founder & CEO, KreditBee Financial Services), Kanika Pasricha (Chief Economic Adviser, Union Bank of India), and Sudipta Roy (MD & CEO, L&T Finance).According to Seth, private sector banks are losing ground in key segments like home loans to public sector counterparts, largely due to pricing pressures and a more risk-averse approach.The latest CRIF report highlights that overall lending activity remained cautious in FY25, with origination growth moderating amid rising affordability concerns and tighter credit conditions.While public sector banks and NBFCs expanded their market share, borrowers showed a clear preference for higher-value loans in response to rising asset prices.
In contrast, demand for small-ticket loans weakened, with elevated delinquency levels adding to the pressure.Below are the edited excerpts of the interview.Q: Sachin Seth, can you begin by telling us the key things, anything surprising that you noticed?Seth: Every time we release this report, there are many things which come complete surprise. This time, I will say there are three, four points. This microfinance – the issue, or the stress, which has been there I think it has lasted much longer than anybody expected. Every quarter, everybody has been tracking, and we hope that we will recover from that. However, it has lasted much longer. We are seeing some signs of improvement now, as we saw the data last month, but that is one thing which surprised all of us.Second, if you see the share gain by public sector banks and even NBFCs in many of the segments over private sector banks, that has been a big surprise. Because there has been a stronghold of private sector banks in many of the segments, including home loans, credit cards, personal loans, etc., that has been a very, very eye-opening thing, which means that there are systemic change happening in the industry that’s a new thing.The third thing is the amount of focus and thrust being given by the government and multiple ecosystem partners on MSMEs; we were hoping that there could be a lot more adoption. There have been improvements, but I think there’s still a lot more to be done.Also, in consumer durable segments, or other personal loan segments, we see that it’s continued to be dominated by three or four players, primarily NBFC players, which is very, very different compared to other industries. There are only one or two bank players, and NBFCs are doing far better there. So that continues to be there.Q: You have been a veteran player. Anything surprised you, shocked you in the findings of the trends in FY25?Roy: Maybe the pace of slowdown in some places has been a little more than what I estimated, so if you say that is something that I found, probably a little more than my expectations. However, the fact is that from an asset quality point of view, last year was a tough year. Most of the lenders took up their sort of credit guardrails and coupled on top of it – if you see, from the latter part of 2023, the Reserve Bank of India also started upping its ante on, sort of curbing the runaway growth in unsecured loans, a variety of actions.Now, when the regulator is also pushing you to sort of temper your growth, as well as when you have risk rising on the margin, which obviously the private sector banks with very large unsecured portfolios, credit cards and personal loans portfolios, and then we saw the microfinance, sort of asset quality issues start bubbling in the front from the April of last year – overall, there was a sort of a realisation in the industry that probably, and the froth as we call it, on top of the ecosystem had built to a certain extent that there was a slowdown.Q: I was more surprised by MSME originations falling. It was a good year of growth, the decent year of growth – FY25 that surprised you?Roy: No, it didn’t surprise me, because you have to understand that everything is connected, and MSME also takes unsecured loans. So, the fact is that when you have one part of the sort of ecosystem exhibiting risk, which is in credit cards and many of the MSMEs, especially on their personal or individual capacity, also borrow from the market. The fact is that when you underwrite an MSME loan, you not only underwrite their business, you also underwrite their personnel. And when you see that their personal borrowing facilities are showing signs of stress, the guardrails also go up in MSME lending. Overall, the risk perception of the industry went up, which led to increased sorts of credit guardrails across all segments, which led to a sort of secular degrowth in lending.Read Here | PSU Bank shares in focus after these three lenders report healthy business growth in Q1Q: The report says small ticket loans saw slower uptake and higher delinquency pressures, whereas the borrowers seem to have gravitated towards higher ticket loans. Is this saying about a K-shaped recovery? What does this say?Pasricha: It is the high-ticket loans that are gaining momentum, and I will connect with what Sachin talked about. The reason why private sector banks were not growing as much as public sector banks, one of the key areas is home loans. In home loans, what we found is that private sector banks growth is less than 5% if I look at RBI data, I am not quoting from How India Lends report, while public sector banks home loan growth is around 12 to 15% while the accounts, the number of accounts, growth is falling in both segments. But it’s the ticket size of loans that’s rising in public sector banks because private sector banks, as the cycle started to shift towards easing, didn’t want to get into EBLR-linked loans.In fact, there’s such competition in the home loan market that the interest rate bucket for 9% to 11% which had a 65% share in FY23, fell to only 40% in FY25 it all shifted to 7 to 9, so private sector banks were not willing to lend there. So, the ticket size of the loans has shifted from the private sector to the public sector, and that too, we have seen it is the higher ticket size loans as part of the K-shaped recovery that are growing more, while the smaller ticket size loans are struggling. It is the shift in wealth effect; it is a shift in the income pyramid as well, and it’s the bottom of the pyramid that’s still struggling with inflation, while the upper end is relatively comfortable.Q: Sachin’s report says early-stage stress showed improvement. Now, does this mean that we are in an improving cycle of bad loans, because early-stage defaults are declining?Ekambaram: Before getting into the report itself, let me talk a little bit about what we saw in the industry as such. If you take Q1 of FY25, which was last year, somewhere in that April, May, June quarter, everyone saw the stress in the unsecured lending space. It could be either a short-term personal loan, a long-term personal loan, or even microfinance that started showing certain stress. Now, it all depended on when each of the company’s stress kinds peaked, when did the risk peak?. So, most of the NBFCs, when we see that, it peaked by Q2 end in the results, we could see that, or in Q3 somewhere, the risk was peaking. After that, it was always improving. But the stress continued somewhere in the microfinance segment, and people say the peak risk is yet to come out and whatnot. But that is where it has continued as a higher risk within the personal loan segment.Now, specifically coming to, let’s say the fintech segments where we operate what we saw was that the Q2 where the risk peaked at after that it has been in a very much of improving trends or the declining trends is what we have seen, and that’s how the industry benchmarks are also showing. Something from the report, what I have seen is that while a lot has been talked about, there has been a risk that has built up in the short-term personal loan or the small ticket personal loan. However, if you go a little bit deeper and look at it, less than ₹1 lakh, the risk has not built up. The risk has built up in like ₹2 lakh to ₹10 lakh segment is where we have seen the risk has deteriorated over time. However, less than ₹1 lakh has always been performing well; that is what the data shows. However, there has been a lot of narrative, both in the media and everywhere else there, that anything less than ₹50,000 or ₹1 lakh has been more stressful. However, that’s not the case if we just look at the report data, and that has been a pretty surprising element for me.Read Here | SBI chief says credit revival in sight, but it hinges on capex and sentimentQ: An earlier report had said under ₹50,000, but that was an old report, so maybe things have changed since. Sachin, would you agree with what Madhu says? Will we in FY26 see less stress? The financial stability report that Kanika referred to gave the impression, especially for NBFCs, that stress will rise from about 2.9% they are expecting the baseline to go to 3.3% but you are seeing some signs of early-stage delinquency falling. What is your best guess that 2026 will be more than 2025?Seth: It is a forward-looking statement, so we always look at the data from the Bureau from the past. However, we are seeing the signs, and we have also compared it with the last two or three years in certain situations. If I stick to the segments, what we have assessed, definitely, we are seeing that certain corrective actions are being taken by lenders. Microfinance, we are working very closely with the industry. We are seeing corrective actions, and in fact, I can tell you what is not in the report. We have even taken the data from April also, and we are seeing that there is an improvement; decline is happening. We are hoping that when we release the report in June, it will definitely have improvements. So, hopefully that will be better.If we look at personal loans, etc. lot of corrective actions have already been taken by every lender, and there is a very cautious approach, so that is being taken care of. People are shifting to asset-based lending and more secure lending. So, there is a lot of talk happening on micro LAP, etc., which are, by design, less sort of risky assets. There is a shift in the industry happening towards that. Even overall lending portfolio, you see the growth which is happening is towards that.The highest growth has been in the gold loan. In fact, if you see the portfolio growth, there has been a decline in almost everything except gold loan, and the RBI has already come out with saying that you need to have even a bureau check there, which most of the people are not doing.With all this, keeping in mind, I think the industry ecosystem, the guardrails, the RBI guidelines, the liquidity, the changes which have been done in the allocation for the MFIs, the measures are being taken.If you keep the portfolio as it is, I can definitely say that this portfolio will improve. The underwriting things are improving. I would say overall, we will definitely have an improvement in the portfolio quality. However, yes, there are new lenders coming into the market. They want to gain more market share. So, there could always be a mixed bag, fair point, but same portfolio, if you keep it definitely, the portfolio is going to become better.For the entire discussion, watch the accompanying video

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