Utkarsh SFB Reports Q2 Net Loss Amid Strategic Shift to Secured Lending

Utkarsh Small Finance Bank reported a significant net loss of ₹348 crore for the second quarter ending September 30, 2025, in stark contrast to a net profit of ₹51 crore in the corresponding period last year. The loss was primarily driven by elevated provisions and weaker income generation. Key Financial Highlights: Net Interest Income (NII): NII saw a sharp decline of 37.2% year-on-year, falling to ₹350.5 crore from ₹558 crore. This was a result of the bank deliberately tightening underwriting standards and moderating disbursements in its unsecured micro-banking portfolio. Asset Quality: The bank’s asset quality weakened during the quarter. Gross Non-Performing Assets (GNPA) rose to 12.42% from 11.42% in the previous quarter (Q1 FY26). However, Net Non-Performing Assets (NNPA) remained flat at 5%. Operating Performance: The bank posted a pre-provision operating loss of ₹3 crore, a significant reversal from the ₹276 crore operating profit reported in Q2 FY25. Strategic Pivot & Balance Sheet Management: Management characterized the quarter as a deliberate move from "quantity to quality," emphasizing a strategic shift towards secured lending. Portfolio Mix: The share of secured loans in the portfolio increased substantially to 47% as of September 2025, up from 38% a year prior. This pivot resulted in a 2.3% contraction in the overall loan book to ₹18,655 crore. Deposits & Liquidity: On the liability side, total deposits grew a healthy 10% YoY to ₹21,447 crore, bolstered by a 28.8% surge in retail term deposits. The CASA ratio improved to 20.9%. Consequently, the bank's credit-to-deposit ratio improved significantly to 78.8% from 93% last year. Capital Adequacy: The bank strengthened its capital position through a ₹950 crore rights issue in November 2025 to augment its Tier-1 capital.