Indian Banks NPAs to Stay at 2.0–2.2% by 2027

New Delhi, April 17, 2026:
CRISIL Ratings projects that Indian banks will maintain stable asset quality over the next two years. The agency expects gross non-performing assets (NPAs) to remain in the range of 2.0–2.2% by March 2027. Despite ongoing risks from the West Asia conflict, the sector continues to show strong resilience.

Banking Sector Maintains Strong Stability

CRISIL states that banks will keep NPAs close to the historic low of 2.0% recorded in March 2026. Moreover, strong corporate balance sheets and disciplined lending practices continue to support this stability.

However, the West Asia conflict may slightly slow economic growth. As a result, India’s GDP could moderate to 7.1% this fiscal, compared to 7.6% last year.

Corporate Segment Drives Resilience

The corporate segment contributes 36% of total bank credit. It continues to perform well, and CRISIL expects NPAs in this segment to stay stable at 1.2–1.3%.

Importantly, companies have significantly improved their financial health:

Gearing ratio stands at 0.53x
Interest coverage ratio has increased to 5.2x

Furthermore, CRISIL conducted a stress test across 30 sectors. The results show:

23 sectors will experience minimal impact
6 sectors may face moderate pressure
Only the ceramics sector could see significant stress

Therefore, most industries remain well-positioned to handle external shocks.

MSME Segment Faces Moderate Challenges

In contrast, the MSME sector shows higher vulnerability. It accounts for 19% of total credit, and CRISIL expects NPAs to rise slightly to 3.4–3.6%.

This increase may occur due to:

Rising input costs
Supply chain disruptions
Extended working capital cycles

Nevertheless, government support schemes will likely reduce the overall stress. Additionally, banks have improved underwriting standards, which further strengthens the segment.

Retail Loans Show Consistent Performance

Meanwhile, retail loans—making up 33% of total credit—continue to perform steadily. CRISIL expects NPAs in this segment to remain between 1.1–1.3%.

Housing loans remain strong with NPAs around 1%
Banks have tightened controls on unsecured loans
Newer loan portfolios show better repayment behavior

However, rising household debt and early-stage delinquencies still require close monitoring.

Agriculture Sector Remains Weather-Dependent

At the same time, the agriculture sector remains sensitive to monsoon conditions. Since forecasts indicate below-normal rainfall for the first time in 11 years, banks must monitor this segment carefully.

Outlook: Stable but Cautious

Overall, CRISIL expects NPAs to remain range-bound through March 2027. Strong corporate fundamentals, supportive policies for MSMEs, and stable retail performance will continue to drive this trend.

However, the sector must closely watch: