RBI Forecasts Continued Improvement in Bank Asset Quality

The Reserve Bank of India predicts a decrease in banks' gross non-performing assets ratio to 1.9% by March 2027. Currently, it stands at 2.1% as of September 2025. Despite potential economic challenges, capital ratios are robust, with state-owned and private banks maintaining strong buffers.

The Reserve Bank of India (RBI) has forecasted a further decline in banks' gross non-performing assets (GNPA) ratio, projecting it to improve to 1.9% by March 2027, under a baseline scenario. As of September 2025, the GNPA ratio stood at a low of 2.1%, the central bank highlighted in its Financial Stability Report.

The report also delves into potential adverse scenarios where the GNPA ratio could rise to 3.2% and 4.2%. However, the capital to risk-weighted assets ratio (CRAR) remains strong, with state-owned banks at 16% and private sector banks at 18.1%, ensuring resilience against economic shocks.

Scheduled Commercial Banks (SCBs) show a slight dip in aggregate CRAR under the baseline scenario, from 17.1% in September 2025 to 16.8% by March 2027. Despite stress tests showing a higher depletion in public sector banks, six banks might breach the regulatory minimum CRAR under severe conditions, but the top-100 borrowers' concentration has reduced, improving asset quality.

(With inputs from agencies.)