Archive · 24 Aug 2026
Goldman Sachs Sees Indian Banks Weathering West Asia Risks
Goldman Sachs studied whether problems in West Asia could hurt Indian banks.
It expects the banks’ loan quality to remain mostly stable.
The biggest concerns are loans without collateral, especially consumer loans and microfinance loans.
Some banks lent too quickly in these areas, which caused more borrowers to struggle.
Lending in these areas has slowed over the past 12-18 months.
The microfinance loan book is now 25% smaller than its March 2024 peak.
Large private banks have had limited stress, while state-owned banks had no exposure to the highlighted segment.
Guarantees covering many microfinance loans could help protect banks if more loans become bad.
Goldman Sachs expects Indian banks to maintain stable asset quality despite geopolitical uncertainty in West Asia.
The main bad-loan concerns involve consumer unsecured lending and the microfinance segment.
The microfinance loan book has contracted 25% from its March 2024 peak of Rs 4.4 trillion.
Consumer unsecured loan growth slowed to 10-12% in FY25 and FY26, from 25-30% in FY23 and FY24.
Government-backed guarantees now cover about 80-90% of several banks’ microfinance loan books, providing an additional cushion.
- Who
- Goldman Sachs and Indian banks.
- What
- Goldman Sachs assessed that Indian banks’ asset quality should remain stable despite West Asia-related geopolitical risks.
- When
- The report references developments over the past 12-18 months and lending trends in FY25 and FY26.
- Where
- India, with potential risks linked to the West Asia crisis.
- Why
- Slower unsecured-lending growth, deleveraging, limited exposure to vulnerable segments and government-backed microfinance guarantees are expected to contain fresh bad-loan risks.
- Overall outlook
- Indian banks are expected to maintain stable asset quality.
- Main risk areas
- Consumer unsecured loans and microfinance lending.
- Microfinance contraction
- The microfinance loan book has declined 25% from its March 2024 peak.
- Peak microfinance loan book
- Rs 4.4 trillion in March 2024.
- Consumer unsecured growth
- Growth slowed to 10-12% in FY25 and FY26, compared with 25-30% in FY23 and FY24.
- Microfinance guarantee coverage
- About 80-90% of the loan book at several banks is covered by the Credit Guarantee Fund for Micro Units.
- Exposure by bank type
- State-owned banks had no exposure to the highlighted segment, while large private banks faced negligible to manageable stress.