Indian banking sector robust with record-high capital buffers, non-performing loans ratios at multi-decade lows: RBI

The Reserve Bank of India on Monday in its Financial Stability Report said that India’s banking system has remained robust with capital buffers reaching record high, non-performing loans ratios at multi-decadal low, and improved operational performance.

“Macro stress tests reaffirm the resilience of banks to adverse scenarios. The resilience of the NBFC sector is bolstered by enhanced asset quality and healthy capital buffers. Interconnectedness among financial sector entities, as reflected in their bilateral exposures, continued to grow in double-digits,” said the RBI in its report.

Indian banks’ gross bad loan ratio will remain close to multi-decade lows if economic growth holds steady as projected, a report published by the central bank on Monday showed.

The Reserve Bank of India forecasts growth at 6.5% and 6.7% in fiscal 2026 and 2027.

The gross bad loan ratio of 46 banks was at 2.3% in March 2025 and is seen rising only marginally to 2.5% by March 2027, the RBI said in the Financial Stability Report.

The gross bad loan ratio is the proportion of bad assets of a lender to total loans.