Icra cuts Utkarsh Small Finance Bank ratings on weak asset quality

Icra has downgraded Utkarsh Small Finance Bank's debt instruments by a notch due to the lender's weak asset quality and earnings profile.

The bank’s gross non-performing assets ratio remained elevated at 7.7% as on March 31, 2026, despite writing off and selling down a sizable chunk of stressed loans. The gross loan was 9.4% a year prior.

"The deterioration was markedly visible in the microfinance segment though delinquencies have increased in other product segments as well," the rating company said, adding that fresh slippages remained high even as the collection efficiency is gradually improving.


The rating agency downgraded the bank's certificate of deposits to "A1" from "A1+" earlier and subordinated debt to "A-" from "A".

The bank’s earnings profile also weakened due to elevated credit costs and subdued operating efficiency. Icra said that muted growth in the portfolio, interest reversal on NPAs and the shift in the portfolio mix towards relatively lower-yielding asset classes have adversely impacted Utkarsh’s operating profitability.