The soundness and resilience of India’s scheduled commercial banks are bolstered by robust capital buffers, multi-decadal low non-performing loans and strong earnings, according to the RBI’s latest Financial Stability report.
The country’s scheduled commercial banks continued to record improvement in their asset quality, with the GNPA ratio and NNPA ratio declining to multi-decadal lows of 2.3 per cent and 0.5 per cent, respectively, the report states.
While overall gross NPAs (non-performing assets) of banks fell to 2.3 per cent of total loans as of March 31 from 2.8 per cent a year ago, public-sector banks registered a sharp decline in NPAs from 3.7 per cent in March 2024 to 2.8 per cent in March this year. The gross NPA ratio of private-sector banks remained stable at 2.8 per cent, according to RBI data.
Furthermore, macro stress test results showed that the scheduled commercial banks’ aggregate capital levels will continue to remain above the regulatory minimum, even under adverse stress scenarios, the report states.
The Indian financial sector remained strong and resilient amidst global headwinds. Banks and non-banking financial companies (NBFCs) reinforced their capital and liquidity buffers while improving their asset quality. Bank credit growth decelerated and moved closer to deposit growth, narrowing the gap between both.
The credit expansion by NBFCs was supported by improving credit quality and strong capital buffers. A favourable interest rate environment, conditioned by monetary policy easing, is expected to catalyse credit offtake, going forward.
The capital position of the urban cooperative banks (UCBs) strengthened, while that of the non-banking financial companies (NBFCs) remained well above the regulatory minimum. The consolidated solvency ratio of the insurance sector, both life and non-life segments, remained above the minimum prescribed threshold limit. Stress test results of mutual funds and clear corporations affirm their resilience to shocks, according to the report.
The half-yearly slippage ratio, measuring new accretions to NPAs as a share of standard advances at the beginning of the half-year, remained stable at 0.7 per cent while the provisioning coverage ratio of banks at 76.3 per cent in March 2025 was marginally lower than that in September 2024, the report added.
