PSU Banks emerged as the clear winners over their private sector rivals during the year 2025. Cleaner balance sheets and solid credit growth especially in the retail and MSME sectors were the main factors that led the state-backed lenders to win over investors’ trust like never before. Among the major contributors to this success were Canara Bank and Bank of India, with their share prices off by 50% and 40%, respectively. The State Bank of India (SBI) also wrapped up the year on a positive note with a good 22% gain, which only reinforced the narrative of the entire Public Sector’s continuous advancement through better asset quality and stable operational metrics.
Gold Financiers Glitter Amid Rally
The entire year saw gold prices maintain their upward trend and, consequently, Gold Financiers profited from the rising value of their collateral. Muthoot Finance and Manappuram Finance were among the companies that realized considerable profits, as more and more borrowers opted for secured gold loans rather than unsecured riskier ones. The Gold Loan Surge was also fueled by the four-fold growth of the segment over the last three years. In this area, lenders enjoyed lower credit costs and quicker turnaround times, thereby making gold loans a “safe haven” not only for financial institutions and low-income borrowers but also during a period of selective credit growth.
MFIs Struggle with Unsecured Stress
The phenomenon of unlocked lenders’ success is in stark contrast to the struggle of MFIs, which was aggravated by a sharp contraction in the micro finance sector. The very atmosphere of heightened stress that characterized unsecured, small-ticket lending brought forth the muted growth and the rising delinquencies, with the latter being particularly present in the rural and semi-urban areas. Mounting regulations and a shift in lending preference from unsecured loans to secured assets compelled a number of microfinance players to revise their business models. Though the government has put forward a credit guarantee scheme as a measure to help the smaller players with their liquidity problem, the microfinance headwinds are still believed to last until early 2026 as the sector undergoes a process of consolidation and strategic reorientations.