More Stories

Informist, Tuesday, Jun. 30, 2026

 

Please click here to read all liners published on this story

--RBI report: Stress test shows bks gross NPA 1.9% by Mar 2028 in base case 
--RBI report: Banks' gross NPA may be 3.8-4.1% by Mar 2028 if econ worsens 
--RBI report: Test shows 1-2 bks breaching capital norms under severe stress 
--RBI report: Stress test shows bks capital 15.6% by Mar 2028 in base case 
--RBI report: Test shows bks capital 13.0-13.3% by Mar 2028 in severe stress 
--RBI report: Bks meet minimum CET1 capital needs under all stress tests 
--RBI report: Stress test shows NBFCs' gross NPA 2.8% by Mar in base case 
--RBI report: Stress test shows NBFCs' capital ratio 20.8% Mar in base case 
--RBI report: 15 NBFCs below capital norms under severe credit stress test 
--RBI report:Some MFs fell below minimum liquidity norms on debt schemes Mar 
--RBI report: MFs addressed norm breaches on debt schemes in timely manner 
--RBI: Stress tests show banking system well-positioned to absorb shocks
--RBI: NBFCs financially sound, have strong capital, improving asset quality
--RBI: Insurers show balance sheet resilience; solvency ratio above threshold 

 

NEW DELHI – The Reserve Bank of India's macroeconomic stress test showed the gross non-performing asset ratio of banks would rise to 1.9% by March 2028 from 1.8% at the end of 2025-26 (Apr-Mar), according to the central bank's Financial Stability Report for June. At 1.8%, the gross NPA ratio was at a multi-decade low on Mar. 31, the report, released on Tuesday, said.

 

Under an adverse scenario where geopolitical risks intensify in FY27 before improving in FY28, the bad loan ratio may rise to 3.8%, the stress test of 46 scheduled commercial banks showed. In the most severe scenario, with prolonged and widespread geopolitical conflicts extending into FY28, banks' gross NPAs on loans may rise to 4.1%, the report said. 

 

"Macro stress test results indicate that the banking system remains well-positioned to absorb potential shocks, with aggregate capital ratios projected to remain comfortably above regulatory thresholds even under hypothetical adverse scenarios," the RBI said in a release along with the report.

 

All banks would continue to meet the minimum common equity tier-I capital ratio of 5.5% even in the most severe macroeconomic stress scenario, the report said. However, the capital ratio would fall to 13.9% by March 2028 from 15.2% in March this year, even in the baseline scenario. In the base case, the RBI assumes India's GDP growth at 6.6% in FY27 and 6.4% in FY28, while CPI inflation is projected to average 5.1% in the current financial year and 5.0% in the next. In adverse scenarios, the common equity tier-I capital ratio is projected to decline to 11.4-11.6%.

 

However, one bank will fall below the minimum capital-to-risk-weighted-asset ratio of 9% in the first adverse scenario. Two banks will be in breach of minimum capital norms in the second adverse scenario with slower growth and higher inflation in FY28. On a systemic level, banks' capital-to-risk-weighted-asset ratio will fall to 15.6% in the base case in two years from 17.5% as of March. In adverse scenarios 1 and 2, the ratio will fall to 13.3% and 13.0%, respectively.

 

In more specific stress tests, systemic capital adequacy would remain above regulatory minimums during a credit shock in which gross non-performing asset ratios rise to as high as 8.1%. Four banks, with a 12% share of total asset among scheduled commercial banks, would breach the regulatory minimum capital-to-risk-weighted-asset ratio of 9%. Meanwhile, the credit concentration risk index rose sharply over the two quarters to March, reversing a trend since September 2023, during which it had been declining. 

 

"All bank groups incurred losses on securities trading in the quarter ending March 2026," the report said in the section detailing interest rate risk. "For PSBs (public-sector banks) and PVBs (private-sector banks), profits from securities trading declined steadily over the preceding three quarters, before turning negative in March 2026." In an adverse interest rate scenario, the RBI said the capital ratios of two foreign banks would fall below the regulatory minimum of 9%.

 

NON-BANKS

As for non-banking financial companies, the RBI stress test showed a rise in the gross non-performing asset ratio to 2.8% by March, from 2.4% at the end of FY26, assuming business continues as usual. The aggregate capital-to-risk-weighted-asset ratio would fall to 20.8% in the same period, down from 22.3% in March this year, with seven of the 174 NBFCs tested breaching the minimum capital requirement of 15%.

 

In the medium- and severe-stress scenarios, capital ratios of the tested NBFCs would fall by 60 bps and 80 bps from the baseline, respectively, the report said. Consequently, 15 non-bank financiers may be unable to meet the regulatory minimum capital requirement in the worst-case credit risk scenario. Eight NBFCs would also fail to meet capital minimums if their three largest individual borrowers defaulted, according to the RBI's stress test on concentration risk. 

 

NBFCs also face liquidity risks even in the baseline scenario, with the stress test showing a liquidity mismatch of over 20% over the next year for two institutions. The medium-stress scenario would push five NBFCs with a significant liquidity mismatch, rising to six in the most severe scenario. However, the regulator was sanguine in its commentary.

 

"Non-banking financial companies (NBFCs) remain financially sound, supported by strong capitalisation, healthy profitability, and improving asset quality," the RBI said.

 

For the top five mutual fund schemes by assets under management, an RBI stress test in April showed it would take between five and 23 days for marquee midcap schemes to liquidite 25% of their portfolios. Small-cap equity schemes would take between seven and 33 days, the report said. The RBI had also gauged liquidity risks for open-ended debt schemes of the top 10 asset management companies at the end of March using two ratios. 

 

"Both the ratios were found well above the respective threshold limits for most of the MFs (mutual funds)," the report said. "A few instances of the ratios breaching the threshold limits were addressed by the respective AMCs (asset management companies) in a timely manner."

 

The insurance sector also remained systemically important and sound, the report said. Total premium income rose 11.7% on year to INR 13.3 trillion as of Mar. 31, of which life insurance premiums were INR 10 trillion. The top five life insurers accounted for 81% of the sector's total premium in FY26, while general insurers were more diversified, with only 41% of premium accruing to the top five, the RBI said.  End

 

Reported by Aaryan Khanna

Edited by Saji George Titus

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.