Mid-sized lenders gaining as liquidity improves, unsecured lending picks up: UBS's Vishal Goyal

Vishal Goyal, India Financials Analyst at UBS, said improving liquidity and stable asset quality are helping mid-sized lenders narrow their valuation gap with large banks and non-banking financial companies (NBFCs).

Speaking from the sidelines of UBS India Summit 2025, he said, “Easy liquidity, good asset quality and availability of capital” are giving mid-sized lenders a strong opportunity to perform.

Goyal said lender sentiment at the summit was positive, supported by better demand and a recovery in consumption-driven loans.

“Most lenders are more comfortable lending unsecured once again,” he said, noting that risk appetite has returned after a pause in recent years. Festive demand has also lifted lending activity, though lenders are watching whether this momentum sustains.

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On asset quality, Goyal highlighted stress in micro loans within the MSME segment, particularly for some NBFCs. However, he noted that larger private and state-owned banks continue to see stable asset quality. “Unsecured risk is stabilised,” he said, adding that lenders expect credit losses to decline.

Goyal said banking valuations remain reasonable, with Bank Nifty trading below historical averages. But he added that stronger loan demand is necessary for a major re-rating. Growth, he said, has slowed from 20% earlier to around 10%, with a possible move to 11–12% by year-end.

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He also pointed to a long-term shift in household savings from bank deposits to equities and more sophisticated products, calling it a supportive trend for brokers, asset managers and exchanges. “New flows are growing at a faster rate versus traditional fixed income products,” he said, while acknowledging near-term regulatory risks in the capital market ecosystem.

For the full interview, watch the accompanying video

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