RBI Report: Indian Banks' Bad Loans Expected to Rise Marginally by 2028

Banks’ bad loans, which are at a multi-decadal low, are expected to rise marginally to 1.9% by March 2028 under a baseline scenario from 1.8% in March 2026, even as capital ratios are projected to moderate over the same period according to RBI’s bi-annual Financial Stability Report.

According to the macro stress test results and sensitivity analysis by RBI, the capital and asset quality positions of 46 select scheduled commercial banks over a two-year horizon up to March 2028 are expected to remain stable. Under adverse scenario 1, the aggregate gross NPA (non-performing asset) ratio is projected to rise to 3.8% by March 2028, while under adverse scenario 2, it is projected to rise to 4.1%.

Capital buffers remain above norms even under adverse scenarios. Aggregate CRAR fell from 17.5% in March 2026 to 15.6% by March 2028 under the baseline and dropped to 13.3% and 13.0% under adverse scenario 1 and 2 respectively. CET1 slid from 15.2% to 13.9% under baseline and further to 11.6% and 11.4% under the two adverse stress scenarios.

The report said no bank would breach the minimum regulatory CRAR requirement of 9% under baseline projections by March 2028. “Strong growth, low inflation, healthy balance sheets of financial and non-financial firms, and ample buffers have helped preserve macro-financial stability,” RBI governor Sanjay Malhotra said in a foreword to the report.