The microfinance sector saw asset quality deteriorate sharply in the September quarter with the share of doubtful loans surging to an 18-month high of 11.6%, seemingly validating the regulatory warnings about the accelerating sectoral exposure. Bad assets climbed 140 basis points (bps) in the three months to September. One bp is a hundredth of a percentage point. "Most firms have started to see stress in the MFI (microfinance) segment, largely on overleveraging aspects. Slippages are rising among banks, including IDFC First, Bandhan, AU Small Finance, IndusInd and RBL, not to mention the increase in NBFCs and NBFC-MFIs," said Prakhar Agrawal, analyst, Elara Securities.