Crisil Ratings says Indian banks should keep asset quality largely stable, with gross NPAs expected to remain between 2.0% and 2.2% by March 2027. That would be only slightly above the projected historic low of 2.0% in March 2026. Resilience is driven by stronger corporate balance sheets, while MSMEs face pressure amid the West Asia conflict.
Banking sector asset quality is still holding up, but a new report expects slippages to rise in the near term. The pressure is concentrated in the retail and MSME segments, where stress is building. Even with today’s strong asset quality, investors may need to watch credit costs and delinquency trends closely as earnings approach.
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ICICI Bank’s sharp drop in provisioning is being read as a sign of improving asset quality and a sturdier recovery pipeline. HDFC Bank, however, is taking a more cautious approach, focusing on protecting profitability and asset quality amid macroeconomic headwinds. It also plans to gain deposit market share, targeting faster deposit growth than credit growth.
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