Reserve Bank of India (RBI) projects that gross non-performing assets (GNPAs) in the top 46 banks may increase from 2.3% in March 2025 to 2.5% by March 2027 under its baseline stress scenario. This uptick reflects a cautious outlook on credit quality, despite the banking sector’s continued resilience. Bad loans rise to 2.5% by FY27 highlights both emerging concerns and the sector’s preparedness.
🧾 Stress Test Insights
- The GNPA ratio, currently at 2.3%, is expected to move up to 2.5% by FY27 assuming normal economic conditions
- In more severe “adverse scenarios”, GNPAs could spike to 5.3%–5.6%, reflecting risks from geopolitical turmoil or global slowdown
🛡️ Capital Adequacy & Liquidity Strength
- Despite rising NPAs, banks’ Capital-to-Risk Weighted Assets Ratio (CRAR) remains comfortable at around 17%, well above the 9% regulatory minimum indianexpress
- Under stress, CRAR may dip to 14.2–14.6%, still within safe limits
- Liquidity stress tests indicate banks can absorb sudden deposit withdrawals, with High-Quality Liquid Assets (HQLA) declining modestly but staying adequate .
🚩 Rising Risk from Retail Loans
- Retail delinquencies, especially in credit cards, personal loans, and microfinance, are on the rise due to aggressive unsecured lending despite tighter oversight
- RBI notes these segments require “close monitoring” given elevated vulnerabilities among lower-rated borrowers
📉 Economic Context
- The projections assume GDP growth of 6.5% in 2026 and 6.7% in 2027, consistent with RBI forecasts
- Should growth falter sharply, the stress scenario could lead to NPA levels similar to previous stress peaks (~5.6%).
✅ Summary & What It Means
- A rise to 2.5% GNPAs by FY27 signals caution but not crisis—illustrating steady credit practices and strong buffers.
- Risks are concentrated in unsecured retail lending; however, the system remains well-capitalized and liquid.
- Continued macro vigilance—fiscal discipline, credit oversight, and regulatory measures—will be key to maintaining stability.
