Paisalo Digital earnings rose 27% year on year to INR656 million in the quarter ended September 30, 2026, as assets under management expanded 33% and credit costs declined. The Q2 FY27 results, released on October 22, also showed stronger returns on equity, although net interest margin remained below management’s full-year target.
Key Takeaways
- Assets under management reached INR72,659 million as quarterly disbursements grew 42%.
- Lower bad-loan ratios and credit costs accompanied the increase in profit.
- Management expects late-quarter fund deployment to normalize, supporting margins in Q3 and Q4.
Table of Contents
- Paisalo Digital earnings grow alongside lending
- Funding costs leave margins below the annual target
- Asset quality improves as rural underwriting tightens
- Digital rollout remains a management milestone
- Conclusion
Paisalo Digital earnings grow alongside lending
Quarterly total income increased 24% to INR2,773 million, while net interest income rose 17% to INR1,476 million. Disbursements reached INR15,673 million, up 42% from the corresponding quarter a year earlier.
For the first half of FY27, profit after tax increased 29% to INR1,270 million and disbursements rose 77% to INR32,982 million. Quarterly return on equity improved to 13.4% from 11.8% a year earlier.
The larger lending business was accompanied by lower credit charges. Credit cost fell to 0.4% from 1.1% in Q2 FY26, while first-half loan losses and provisions declined 47% to INR155 million.
| Item | Details |
|---|---|
| Total borrowings | INR54,808 million at September 30, 2026. |
| Debt-to-equity ratio | 2.89 times. |
| Capital adequacy | 30.7%, including Tier 1 capital of 25.2%. |
| Distribution footprint | 6,415 touchpoints across 23 states. |
Funding costs leave margins below the annual target
Net interest margin stood at 5.7%, compared with management’s annual guidance of about 6%. Finance costs grew 33% year on year, faster than the 24% increase in total income.
Deputy Managing Director Santanu Agarwal attributed the mismatch largely to funds raised and deployed late in the quarter. He said yields had not been reduced to enter particular products or regions and expected deployment and yields to normalize in Q3 and Q4.
The cost of borrowing was 10%, about 15 basis points lower than a year earlier. Agarwal maintained full-year cost-of-funds guidance of 10.5% and said management had already allowed for a potential increase of 25–30 basis points. Those expectations remain guidance rather than achieved results.
Asset quality improves as rural underwriting tightens
Gross non-performing assets fell 15 basis points year on year to 0.66%, while the net ratio declined 19 basis points to 0.46%. Collection efficiency was 98.3%.
The company tightened underwriting and moderated rural disbursements amid monsoon deficits and drought conditions in Maharashtra, Karnataka, Andhra Pradesh and Telangana. Agriculture and allied activities accounted for about 15% of its portfolio, with the remainder spread across small-business and micro-enterprise activities.
For bank lending to agriculture, the RBI’s priority-sector lending criteria are activity- and beneficiary-specific rather than determined by collateral alone. That distinction provides regulatory context for agricultural credit, but does not establish whether individual Paisalo loans qualify for priority-sector treatment.
Digital rollout remains a management milestone
Paisalo’s employee base declined 11% year on year despite its larger asset base. Agarwal linked the reduction to operating leverage from earlier distribution and product investments, while cautioning that building an artificial-intelligence framework still carried high near-term costs.
Management targeted a consumer-facing app launch by the end of Q3 FY27, around Christmas or New Year, followed by marketing and stabilization in Q4. Agarwal expected to begin sharing app metrics in Q1 of the following fiscal year.
The State Bank of India co-lending arrangement remained unchanged. Agarwal said Paisalo was ready to proceed but was waiting for banks to complete their side of regulatory implementation; he did not provide a restart date.
Conclusion
Paisalo Digital earnings combined rapid lending growth with lower credit costs, while funding deployment weighed on margins. The next stated milestones are management’s targeted Q3 app launch and the expected normalization of yields and deployment in the second half of FY27.
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