Paisalo Digital's Q3 FY26: AI-Powered Growth and Expanding Financial Inclusion

Paisalo Digital Limited, a prominent player in India's financial services sector, concluded the third quarter of fiscal year 2026 (Q3 FY26) with a robust performance, underscoring its strategic focus on technology-driven financial inclusion. The company reported an Asset Under Management (AUM) of ₹55,082 million, marking a significant 16% year-on-year (YoY) increase, reflecting strong demand and effective portfolio management. This growth was complemented by a record Total Income of ₹2,401 million, up 18% YoY, and a strong Profit After Tax (PAT) of ₹663 million, representing a 6% YoY rise. The quarter's disbursements reached ₹10,574 million, growing 7% YoY, while Net Interest Income (NII) surged 19% YoY to ₹1,453 million, demonstrating effective capital deployment and enhanced operational efficiency.

The quarter witnessed substantial expansion in Paisalo's customer franchise, which now stands at approximately 14 million, with the addition of about 1.6 million new customers. This expansion is a testament to the company's high-reach, financially inclusive lending platform, successfully penetrating deeper into underserved markets. The strategic addition of 492 new touchpoints brought the total to 4,872 across 22 states, further solidifying its pan-India presence and last-mile delivery capabilities. The company's Pre-Provision Operating Profit (PPOP) also saw an 8% YoY increase, reaching ₹943 million, highlighting strong underlying operational resilience and cost management. These results collectively paint a picture of a company executing its growth strategy with precision, leveraging both digital innovation and an expansive physical footprint to serve critical economic segments.

Strategic Pillars and AI-Driven Transformation

Paisalo Digital's robust performance in Q3 FY26 is deeply rooted in its strategic commitment to an AI-led franchise, which forms the core of its operational strategy. The company is actively transitioning from a high-touch to a Fin AI model, integrating artificial intelligence across its entire lending lifecycle, from customer acquisition to portfolio management. In customer acquisition, AI-powered sourcing and deep analytics are streamlining lead generation, identifying high-propensity targets and reducing customer acquisition costs. Digitized onboarding processes, including fully compliant eKYC migration, have dramatically reduced turnaround times from days to minutes, enhancing customer experience and operational efficiency.

For underwriting, Paisalo employs proprietary AI/ML models that leverage extensive data from bureau records and bank statements to build comprehensive borrower profiles and assess digital footprints. This enables near real-time decision-making, faster credit TAT (Turnaround Time), and sharper risk scorecards, moving beyond traditional credit history. The disciplined credit underwriting, guided by the Character, Credit, and Credibility (CCC) model, ensures robust risk mitigation by evaluating moral integrity, repayment history, and consistency of information. In portfolio management, AI models detect early stress signals pre-EMI and in early delinquency, enabling risk-based customer segmentation and AI-optimized collection strategies, which significantly enhance recovery efficiency. The company's GenAI-based calling system, powered by NVIDIA, exemplifies this technological leap, handling 350,000 calls daily in multiple languages for efficient EMI reminders and proactive customer engagement.

The firm's "Phygital Sourcing" engine, a strategic blend of physical and digital channels, is central to its scalable growth. This model combines the extensive reach of its 402 branches, 3,041 distribution points, and 1,429 Business Correspondents (BCs) with advanced digital tools. The BC network, in particular, is a critical component for driving financial inclusion in rural and semi-urban India, offering a wide array of services from fund transfers to micro-credit. This dual approach ensures both deep ground-level presence and cost-efficient market penetration, reinforcing customer trust and brand familiarity while maintaining strong operational control and supervisory oversight.

Expanding Market Opportunities and Product Ecosystem

Paisalo Digital is strategically positioned to capitalize on India's vast underserved markets, particularly in small income generation and MSME loans. The company effectively addresses a significant credit gap for small income generation loans, targeting a market of 393 million individuals with PAN cards but often lacking formal credit history. With an estimated average ticket size of Rs. 25,000, this segment represents a substantial annual market size of Rs. 9,825 billion. Paisalo's low cost of funds and efficient operations allow it to offer competitive borrowing costs, making credit accessible and affordable to this crucial demographic, thereby fostering livelihood enhancement and economic empowerment.

The MSME sector, a key driver of employment generation and economic growth in India, presents an even larger opportunity. As India's GDP aims for USD 5 trillion and the MSME sector targets USD 2 trillion by FY2028, there is an estimated credit gap of Rs. 1,03,000 billion within an overall addressable market of Rs. 1,38,000 billion. Paisalo's capital-light liability strategy, particularly through co-lending partnerships with leading public and private sector banks like SBI, PNB, Bank of Baroda, UCO, and Karnataka Bank, enables it to target this segment effectively. These partnerships, involving an 80:20 participation model, allow Paisalo to leverage its partners' lower cost of capital while expanding its reach, diversifying its asset base, and mitigating risk.

The company's product ecosystem is continually broadening to meet diverse needs across various economic activities. Beyond traditional small income generation loans (Vikas, Umeed, Pragati, Do ka Dum, Gati) and SME/MSME loans (Raftaar, Ready Steady Go, Udaan), Paisalo is expanding into new offerings such as Agri Equipment, Industrial Equipment, Solar Equipment, Medical Equipment, and Loan Against Property (LAP). This strategic diversification, supported by institutional partnerships with key players like Piaggio, Bajaj, Kubota, Eicher, and Kirloskar, ensures a robust and resilient portfolio. The AUM mix reflects this balanced approach, with 25% in Small Income Generation and 75% in SME/MSME loans, catering to a wide spectrum of micro-entrepreneurs and small businesses, from food vendors to heavy industries.

Financial Discipline and Future Outlook

Paisalo Digital's financial discipline is evident in its healthy asset quality and robust collection efficiency, which are critical for sustainable growth in the lending sector. For Q3 FY26, the Gross Non-Performing Assets (GNPA) stood at a well-contained 0.83%, with Net Non-Performing Assets (NNPA) at an impressive 0.66%. The collection efficiency remained strong at 98.8%, with a significant 89% of collections being digital, highlighting the effectiveness of its sophisticated debt management infrastructure and AI-driven collection triggers. The company's Capital Adequacy Ratio (CAR) of 38.3% (comprising Tier 1 at 30.7% and Tier 2 at 7.7%) further underscores its strong capital position and ample capacity to support future growth initiatives.

The company's prudent Asset Liability Management (ALM) strategy, maintaining a consistently positive ALM gap across various maturity buckets, strengthens its liquidity position and effectively mitigates refinancing risk. This proactive approach ensures that Paisalo can comfortably meet its debt obligations through robust internal cash flows, reinforcing overall financial stability and boosting investor confidence. Furthermore, Paisalo successfully raised Rs 1,885 million at an attractive 8.5% Return on Investment (ROI) through Non-Convertible Debentures (NCDs) and Commercial Papers (CPs) in Q3. This strategic move not only diversified its funding base but also optimized its cost of capital, contributing to improved profitability. The promoters' continued confidence in the company's trajectory is reflected in their increased stake, reaching 41.7% by December 2025, through open market purchases.

Paisalo Digital's Q3 FY26 performance demonstrates strategic clarity and disciplined execution, positioning it as a leader in technology-driven financial inclusion. The company's three-year strategic roadmap aims for a 2x growth in AUM, income, and PAT, while meticulously preserving best-in-class asset quality. By continuously integrating AI across its operations, expanding its phygital network, and broadening its product suite, Paisalo is well-positioned to drive inclusive growth, empower underserved populations across India, and create long-term value for its stakeholders. The focus remains on leveraging innovation to bridge the credit gap and foster economic prosperity in Bharat.