RBI flags higher slippages, write-offs in private banks’ unsecured loan books

The Reserve Bank of India (RBI) has underlined rising stress in the unsecured lending portfolios of private sector banks, noting that while overall asset quality appears stable, fresh slippages and write-offs remain high, according to the central bank’s Financial Stability Report (FSR) for December 2025.

This has come as unsecured retail lending, which boosted bank credit growth in the years following the covid pandemic, has slowed sharply after RBI tightened risk norms in November 2023.

Asset quality

“Even as asset quality in aggregate remains stable – GNPA (gross non-performing assets) ratio at 1.8% vis-à-vis 1.1% for retail advances—slippages in unsecured retail loans constituted 53.1% of the total retail loan slippages of SCBs (scheduled commercial banks),” the report said.

In the December 2024 report, RBI had flagged concerns about higher write-offs of unsecured lending among private sector banks.

In the non-banking financial company (NBFC) sector, asset quality has improved in headline terms, with gross non-performing assets ratios declining, according to the December 2025 report. However, RBI cautioned that fresh accretions to NPAs (non-performing assets) are rising and write-offs are increasing, signalling a gradual build-up of stress in loan portfolios.

Credit growth

Credit to the microfinance sector from NBFCs and NBFC-MFIs (NBFC-microfinance institutions), which forms over half of the total sectoral credit, contracted by 8.5% in the first half of 2025-26.

While stressed assets in the microfinance segment have declined for three consecutive quarters, credit costs for NBFC-MFIs surged to 15.5% in September 2025, up from 4.4% two years earlier, due to higher provisioning and write-offs.

This has come as nearly half of the borrowers availing themselves of credit cards and personal loans already have another loan outstanding, which are often high-ticket loans, such as home or vehicle loans.

Meanwhile, strong growth in gold and unsecured business loans offers some relief for financial stability, as most of this debt is held by low-risk, high-quality borrowers.

“In both banks and NBFCs, the outstanding loans held by higher quality borrowers dominated the unsecured business loans category,” the report said.