MUMBAI: The Reserve Bank has said the banking sector remained resilient in FY26 with the gross non-performing assets (GNPA) ratio declining to a multi-decadal low of 2.1% in FY26, leaving banks with strong capital and robust credit growth.
While gross NPAs plunged to a fresh multi-decadal low of 2.1% or to roughly Rs 4.18 trillion in FY26--a massive improvement from the peak of 11.18% or Rs 10.36 trillion in March 2018, net NPAs fell to a record low of 0.47% or just about Rs 0.94 trillion, the RBI said in its FY26 annual report released on Friday.
Noting that the banks have a robust capital adequacy ratios, the report the capital to risk-weighted assets ratio of banks remains highly stable at 17.24%, well above regulatory minimums, confirming banks are well-capitalized to handle economic shocks. This is despite banks making higher with the provision coverage ratio increasing to a healthy 93.23% indicating banks have heavily provided for their remaining bad loans.
The RBI also said profitability of banks remained robust during the year, supported by improved asset quality and healthy capital buffers. The capital-to-risk-weighted assets ratio also stayed comfortably above the regulatory requirement.
The central bank noted that its stress-test results showed the resilience of banks, indicating their ability to withstand adverse scenarios while maintaining capital buffers above the minimum prescribed levels.
"Stress test results reaffirmed the resilience of banks, indicating their ability to withstand losses under adverse scenarios while maintaining capital buffers well above the regulatory minimum," the central bank said. RBI further highlighted that the financial sector remained resilient on the back of healthy bank and non-bank balance sheets, improved asset quality and capital buffers, enabling double-digit credit growth.
Asset quality and capital adequacy of non-banks also remained robust during the year, the report said.
Meanwhile, bank credit to the commercial sector grew 15.9% on-year in FY26, compared to 10.9% a year earlier, while credit from non-banks rose 13.3% and urban co-operative banks also recorded improvement in credit and deposit growth alongside stronger profitability and capital buffers.
