Credit Costs May Rise in FY26: Report

The stress in short-term unsecured loans and microfinance segments could push credit costs of the banks upward in the Financial Year (FY) 2026, according to a report by CareEdge Ratings.

- TDG NETWORK

However, the report added that since banks already have strong provision buffers or high provision coverage ratios, they are well-positioned to absorb these potential losses.

The Public Sector Banks (PSBs), over the last one and a half to 2 years, have built up strong financial cushions (called provisions) to cover any future loan losses.

The report added that since fewer loans have been turning bad recently, the PSBs don't need to set aside much new money for bad loans. This led to lower credit costs—the money banks spend to deal with unpaid loans.