Banks have reported a marked improvement in asset quality in the unsecured personal, micro and credit card lending segment in Q2FY26, a sore point during the last fiscal as the focus was on providing better quality loans to disciplined borrowers. Lenders are now focusing on gradually rebuilding their unsecured lending business as repayment trends improve, senior bankers say.
Ashok Vaswani, MD and CEO of Kotak Mahindra Bank (KMB), said the bank’s gross and net non-performing asset ratio (GNPA, NNPA) have stabilized and credit cost has fallen from 93 basis points (bps) in Q1FY26 to 79 basis points in Q2, in line with expectations.
Credit modification
“As indicated last quarter, credit costs for personal loans have normalized and we now expect a downward trajectory for both MFIs and credit cards. We remain cautious on private commercial vehicle stress. Overall, we expect credit costs to gradually decline in the second half of FY26. Our focus will now be on gradually rebuilding our unsecured retail business,” he said.
KMB’s fresh slippages or NPAs fell to ₹1,629 crore in Q2FY26, compared to ₹1,875 crore in the same period last year and ₹1,812 crore in Q1FY26. HDFC Bank’s new slippages have been reduced to ₹7,400 crore in the second quarter from ₹9,000 crore in the first quarter, while Axis Bank’s new slippages have been reduced to ₹5,696 crore in the second quarter from ₹8,200 crore in the first quarter. Similar trends were observed in mid-sized and public sector banks.
“In unsecured personal loans and credit cards, stress has leveled off in Q4 2025, with further flattening in the first quarter. Now we are seeing improvement in bounce rates, recovery rates and resolutions across segments. There is a noticeable change we are seeing in unsecured loans. We are seeing better progress in credit cards than in personal loans, which is also in is in recovery mode. Special mention accounts are also sequentially flat,” said Prashant Kumar, MD, CEO, JA Bank.
Subrat Mohanty, ED at Axis Bank, said the two areas in front of the bank were unsecured and there were credit cards. The lender continued to maintain that there will be a stabilizing trend in the cards sector from the fourth quarter of 2025.
“On the unsecured bond side, we are starting to see the stabilization taking place, which we had anticipated in a way, and we had come back to say that we will give you a constructive commentary as part of this quarter’s commentary that we are offering. You will also have noticed that the payout growth has started. The card numbers have gone up,” Mohanty said.
“On the uncertain side, there is also payout growth, which indicates that there is confidence that we can open some of the gates. So that’s basically where we’ll leave this at this point. And you’ll see QoQ how the numbers develop. From our perspective, in the way that we expected, the book is behaving exactly like that,” he added.
Published on October 26, 2025
#Relief #lenders #stress #unsecured #loans #eases