Stress test: Banks’ GNPA ratio may rise to 3% in Mar 2026 from 2.6% in Sept 2024, hints RBI

“The aggregate GNPA ratio of the 46 banks may rise from 2.6 per cent in September 2024 to 3 per cent in March 2026 under the baseline scenario,” the RBI said in its Financial Stability Report for December 2024.

The GNPA ratio of banks may further rise to 5 per cent and 5.3 per cent, respectively, in March 2026, under adverse scenario 1 and adverse scenario 2. While the baseline scenario is derived from the forecasted path of macroeconomic variables, the two adverse scenarios are stringent conservative hypothetical stress scenarios.

The GNPA ratios of public sector banks (PSBs) may rise from 3.3 per cent in September 2024 to 7.3 per cent in March 2026, whereas it may go up from 1.9 per cent in September 2024 to 2.9 per cent in March 2026 for private sector banks (PVBs) and from 0.9 per cent to 1.4 per cent for foreign banks. The stress test results revealed that the aggregate capital to risk-weighted assets ratio (CRAR) of 46 major SCBs may fall from 16.6 per cent in September 2024 to 16.5 per cent by March 2026 under the baseline scenario and to 15.7 per cent under adverse scenario 2.

No bank would fall short of the minimum capital requirement of 9 per cent under both the scenarios. However, under adverse scenario 1, SCBs’ aggregate CRAR may deplete to 14.3 per cent and four banks may breach the minimum capital requirement of 9 per cent, the report said.

The report showed that the asset quality of SCBs improved further, with their GNPA ratio declining to a 12- year low of 2.6 per cent in September 2024.

The half-yearly slippage ratio, measuring new accretions to NPAs as a share of standard advances at the beginning of the half-year, increased marginally to 0.7 per cent as at September 2024. The provisioning coverage ratio (PCR) of banks improved further to 77 per cent in September 2024, largely due to proactive provisioning by PSBs. The write-off to GNPA ratio for foreign banks rose in September 2024 while that of PSBs and PVBs declined marginally. “Disaggregation of NPA movements reveals that write-offs remain a significant component of NPA reduction,” the report said.

The report further said the improvement in asset quality of SCBs was broad based across sectors and bank groups. In the personal loans segment, asset quality remained largely stable, except for a marginal uptick in respect of credit card receivables across bank groups, which recorded the highest credit growth within the personal loans segment and may require careful monitoring.

Delinquency levels in consumer credit remained stable for banks and NBFCs. However, rising impairment was seen in the unsecured retail loan portfolios, it said. Moreover, upgradation is declining and slippage from special mention account 2 (SMA-2) to NPAs are on the rise.

“Nearly half of the borrowers availing credit card and personal loans have another live retail loan outstanding, which are often high-ticket loans (i.e., housing and/or vehicle loan),” the report said. Given that a default in any loan category results in other loans of the same borrower being treated as non-performing by the lending financial institution, these larger and secured loans are at risk of delinquency from slippages in relatively smaller personal loans, it said.

First default is mostly observed in unsecured advances; among the borrowers at risk of default (i.e., advances in SMA category), risk of delinquency is trending high amongst borrowers who in addition to a personal loan or credit card outstanding have availed other retail loans, it said.

According to the FSR, 11 per cent of the borrowers originating a personal loan under Rs 50,000 had an overdue personal loan and over 60 per cent of them had availed more than three loans during 2024-25 so far.

Moreover, nearly three-fifths of customers who have availed personal loans in Q2 of 2024-25 had more than three live loans at the time of origination, the report said.