Banks' NPAs to improve to 1.9 pc by March 2027: RBI

Mumbai, Dec 31 (PTI) Banks' gross non-performing assets ratio will improve further to 1.9 per cent by March 2027 under a baseline scenario, the Reserve Bank said on Wednesday.

As of September 2025, the key ratio stood at a multi-decade low of 2.1 per cent, the central bank said in its half-yearly Financial Stability Report.

"The aggregate GNPA ratio of the 46 banks may improve from 2.1 per cent in September 2025 to 1.9 per cent in March 2027 under the baseline scenario," the report said.

The GNPA ratio may rise to 3.2 per cent and 4.2 per cent under adverse scenarios, the Reserve Bank of India (RBI) said, pointing to results of its stress tests.

From a capital buffers perspective, the report said, the capital to risk-weighted assets ratio (CRAR) remained strong as of September, with state-owned banks at 16 per cent and private sector banks at 18.1 per cent.

Banks will be able to withstand adverse economic shocks, the report said, listing out how the capital buffers will be impacted in adverse events.

The aggregate CRAR of 46 major Scheduled Commercial Banks (SCBs) may drop from 17.1 per cent in September 2025 to 16.8 per cent by March 2027 under the baseline scenario, the report said, adding that it may fall to 14.5 per cent and 14.1 per cent under the hypothetical adverse scenarios, which take into account growth slowdown, and global headwinds, among others.

"Stress tests indicated relatively higher depletion in the capital of public sector banks as compared to private banks and foreign banks," it said.

Six banks with a share of 15 per cent in scheduled commercial banks' total assets would breach the regulatory minimum level of CRAR under a severe shock, it added.

In what can be interpreted as a positive for the system, the RBI study has found that the concentration of the top-100 borrowers waned in the last two years.

The share of large borrowers in total credit of SCBs remained steady at around 44 per cent, but their share in gross NPAs declined significantly over the past few years to 33.8 per cent as of September 2025, it said.

From an earnings perspective, the RBI report said the growth in the core net interest income declined sharply to 2.3 per cent in September 2025 across all bank groups, amid the sharp rate cuts by the central bank.

The net interest margin (NIM) recorded a broad-based 0.20 per cent fall in September 2025 over March 2025 due to a relatively higher decline in yield on assets than in cost of funds, it added. PTI AA BAL BAL