Kinara Capital, a trusted lender for India’s MSMEs, is battling a severe liquidity crunch after some of its lenders recalled loans and seized fixed deposits. This sudden move has created waves in the financial sector, with credit rating agencies quickly downgrading the company’s bonds and loans.
Loan Recalls, Fixed Deposit Appropriations Spark Crisis
In June 2025, a few lenders set off about ₹81 crore from Kinara’s bank balances and encumbered fixed deposits. Close on the heels of this, recall notices worth ₹66 crore were served by others. The company’s free cash dropped sharply, from ₹98 crore to just ₹70 crore. These developments triggered a downward spiral, forcing more lenders to consider early redemptions and adding fresh pressure to Kinara’s liquidity.
Downgrades Paint Grim Picture
Credit agencies rapidly downgraded Kinara Capital’s ratings, flagging critical concerns about its financial stability. The NBFC ended June 2025 with a total loan book of ₹1,853 crore, borrowed from 46 different lenders. The company had breached covenants for nearly 91% of its debt, with only limited temporary relaxations from a handful of lenders.
Troubles Reflected in Financials
The last fiscal year was especially tough for Kinara Capital. The company posted a standalone net loss of ₹351 crore for FY25, compared to a ₹62 crore profit in the previous year. As bad loans increased, Kinara adopted a cautious strategy, which led to a 9.6% contraction in its assets under management, slipping to ₹2,841 crore by March 2025 from ₹3,142 crore a year ago. Total income also fell by 18%, coming in at ₹601 crore, down from ₹734 crore in FY24.
Exploring Solutions, Seeking Stability
Kinara Capital’s leadership says they are working “actively and constructively” with lenders to explore mutually beneficial solutions. Options on the table include selling assets and transferring some liabilities. The company emphasises its focus on financial resilience and long-standing relationships with its lenders.
Serving India’s Small Businesses
Founded in 2011 by Hardika Shah, Kinara Capital has helped over 1 lakh Indian MSMEs with easy and speedy credit. The fintech operates more than 130 branches and claims loan disbursals of over ₹8,501 crore so far. Despite the current crisis, Kinara remains committed to supporting small businesses through its myKinara app and branch network.
What’s Next for Kinara Capital?
As the company fights to regain stability, the coming months will test its ability to restore lender confidence and manage stressed assets. The outcome of ongoing negotiations with lenders will likely decide the future of this key player in India’s MSME lending space.