Synopsis : India’s banking sector has achieved a decade-low gross NPA ratio of 2.3% as of March 2025, reflecting remarkable improvement in asset quality and resilience. The RBI’s Financial Stability Report also highlights robust capital buffers and steady earnings across banks, even under stress scenarios.
India’s banking sector has recorded a major milestone, with gross non-performing assets (NPAs) dropping to a decadal low of 2.3% in March 2025, according to the Reserve Bank of India’s latest Financial Stability Report released on Monday. This improvement in asset quality reflects the sector’s resilience amid global uncertainties and a cautious lending approach by Indian banks.
The RBI report, analyzing data from 46 banks, stated that while gross NPAs could rise marginally to 2.5% by March 2027 under a normal scenario, they could escalate to 5.6% under an extreme adverse global slowdown scenario. These projections are based on rigorous stress tests conducted to assess the banking system’s ability to withstand macroeconomic shocks.
“The soundness and resilience of commercial banks are bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings,” the report noted, underlining the strength of the financial ecosystem even in the face of geopolitical risks and potential global growth headwinds.
Additionally, the report highlighted that stress tests confirmed the resilience of mutual funds and clearing corporations, while non-banking financial companies (NBFCs) also showcased healthy capital buffers, improving asset quality, and solid earnings momentum.
As India positions itself for sustained economic growth, the strengthened banking sector provides a strong backbone for credit expansion while maintaining financial stability, reflecting prudent management and regulatory vigilance.
Disclaimer : This article is for informational purposes only and does not constitute financial or investment advice.
