No bank to fall short of capital requirements, even under severe stress: RBI FSR

While banks’ asset quality remained stable, their y-o-y growth in net interest income has remained muted over the first half of 2025-26, impacting the profit growth
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The Reserve Bank of India’s macro stress test results indicate all banks would maintain capital adequacy above regulatory minimums, even under severe economic conditions.

Analysis revealed the aggregate capital adequacy ratio (CRAR) for 46 major scheduled commercial banks could decrease from 17.1% in September 2025 to 16.8% by March 2027 under baseline projections. Under more challenging hypothetical scenarios, CRAR estimates decline to 14.5% and 14.1% respectively. The central bank confirmed all institutions would remain above the 9% minimum requirement in all tested scenarios within its financial stability report.

Two banking entities might utilize capital conservation buffers under the first adverse scenario, with four potentially requiring buffer support under the second scenario absent capital infusion. Adverse scenario one presumes global economic deceleration causing domestic GDP moderation, while scenario two projects trade disruptions triggering inflation exceeding 6% and subsequent repo rate hikes.

Asset quality

Projections show gross non-performing assets could improve from 2.1% in September 2025 to 1.9% by March 2027 under standard conditions. Stress scenarios estimate potential increases to 3.2% and 4.2% respectively.

Public sector and foreign banks drove improvements in asset quality metrics, with systemwide gross NPAs reaching multi-decade lows of 2.2% by September 2025. Net NPAs remained stable at 0.5% across all bank categories. The report noted private banks experienced slightly higher loan slippage ratios and write-offs compared to public sector counterparts during the 2025-26 financial period.

Core business

Deposit growth slowed to 9.8% year-on-year by September 2025, with private banks recording steeper declines. The proportion of low-cost current and savings account deposits continued decreasing while term deposits gained market share across banking segments.

Systemwide credit expansion remained steady at 11% annually, supported by private bank lending growth offsetting public bank moderation. Sectoral analysis showed rising contributions from services and personal loans, while agricultural and industrial lending shares contracted. Private banks recorded significant industrial loan growth whereas public banks expanded personal loan portfolios.

Published on December 31, 2025