India Financials "AQ held up in March but macro risks rising" Srivastava

Research evidence excerpt

India Financials "AQ held up in March but macro risks rising" Srivastava

Global Research

19 May 2026ab

India Financials Equities

IndiaAQ held up in March but macro risks rising

Financial Services

Alok Srivastava

AQ improving though rising macro risk could weigh on margins/growth Analyst

Mar-26 CRIF Bureau data suggests continued improvement in asset quality across Retail alok.srivastava@ubs.com

and MSME segments. We believe the unsecured asset quality cycle has likely peaked for +91-22-6155 6037

both banks and NBFCs though macro risks pose risks to recovery. We see small and Vishal Goyal

medium ticket unsecured business loans as most exposed in the near term to macro risks Analyst

where we are still at an early phase of recovery and several lenders are cutting exposure. vishal.goyal@ubs.com

While commercial vehicle is showing very strong asset quality trends, we are watchful +91-22-6155 6050

given recent oil price hikes. Amongst other segments, LAP and housing trends have Yash Agarwal

remained resilient but small deterioration is being seen in low ticket segments for NBFCs Analyst

in March over February. We further note that macro factors are beginning to weigh on yash.agarwal@ubs.com

cost of funds and growth. NBFC AAA and AA bond yields have inched up by nearly +91-22-6155 6007

20bps since Mar'26 which, coupled with sticky cost of funds for banks, poses downside Anish Kumar Rai

risks to our margin assumptions for FY27. Most exposed names to MSME unsecured Analyst

space in our coverage are Bajaj Finance and HDB; Chola, Poonawalla and BHFL are most anish.rai@ubs.com

exposed to secured MSME. Midcap banks are more exposed to AQ risks while SOE banks +91-22-6155 6046

could face earnings pressure due to rising bong yields. Karan Paresh Trivedi

Associate Analyst