Fresh non-performing assets in Banking Sector likely to rise in FY27: Icra
Ratings agency Icra in its latest report has said that Fresh non-performing assets (NPA) in the banking sector are expected to increase during the current fiscal (FY27), with private sector banks expected to face relatively higher pressure due to their exposure to unsecured retail and micro, small and medium enterprise (MSME) loans.
It expects the trend of relatively higher loan slippages at private sector banks to continue in the second half of FY27, even as credit costs are projected to remain favourable and significantly below historical levels. According to its estimates, the fresh NPA generation rate for public sector banks is expected to stand at 0.8 per cent in FY27, compared with 2.5 per cent for private sector banks.
In absolute terms, fresh NPA is estimated at Rs 1 lakh crore in FY27 for state-owned banks and Rs 1.3 lakh crore for private banks. It attributed the relatively higher slippages at private sector banks over the past two years to their higher share of unsecured retail and MSME loans. Despite the anticipated increase in fresh bad-loan generation, it expects the banking sector will continue to report healthy profitability, supported by favourable credit costs and adequate capitalisation.
Besides, the agency projected the banking sector's gross non-performing assets (GNPA) ratio at 1.7-1.8 per cent by March 2027 from 1.7 per cent in June 2026. The net NPA ratio is expected to remain at 0.4-0.5 per cent against 0.4 per cent in June 2026. According to the rating agency, bank credit growth to remain healthy at 15.1-15.9 per cent in FY2027, translating into incremental credit of Rs 32.3-33.8 lakh crore.
