How Have India's Scheduled Commercial Banks' GNPA Improved in Q2FY26?
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Synopsis
In a significant financial development, India's scheduled commercial banks have reported a notable improvement in their Gross Non-Performing Asset (GNPA) ratio, dropping to 2.1% in Q2FY26. This reflects the effectiveness of recovery strategies that have enhanced asset quality, making it a crucial update for investors and stakeholders in the banking sector.
Key Takeaways
- GNPA ratio improved to 2.1% in Q2FY26.
- NNPA ratio steady at 0.5%.
- GNPA decreased by 11.1% YoY.
- Strong recoveries and upgrades helped asset quality.
- PVBs faced a 27.5% YoY increase in credit costs.
New Delhi, Nov 20 (NationPress) The Gross Non-Performing Asset (GNPA) ratio for scheduled commercial banks (SCBs) has seen an improvement, reaching 2.1 percent in the second quarter of the fiscal year 2026 (Q2FY26), down from 2.6 percent a year prior, according to a report released on Thursday.
Additionally, the GNPA has decreased by 11.1 percent year-on-year (YoY), totaling Rs 4.05 lakh crore.
CareEdge Ratings noted that the Net Non-Performing Asset (NNPA) ratio has remained stable at 0.5 percent for the third consecutive quarter, compared to 0.6 percent in Q2FY25, with NNPAs declining by 9.9 percent YoY to Rs 0.88 lakh crore.
These positive outcomes are attributed to robust recoveries and upgrades, diminished incremental slippages, and strategic portfolio clean-up through write-offs and sales to Asset Reconstruction Companies (ARCs).
On a sequential basis, SCBs' GNPAs and NNPAs fell by 4.2 percent and 5.1 percent, respectively, influenced by lower incremental slippages alongside recoveries and upgrades, as well as heightened NPA resolutions via ARC sales, showcasing a sustained enhancement in asset quality.
The report indicates a slight 1.4 percent YoY increase in aggregate provisioning for SCBs in Q2FY26; however, the credit cost (annualized) ratio has eased to 0.41 percent in Q2FY26 from 0.45 percent the previous year, indicating stronger asset growth relative to provisioning increases.
In contrast, private sector banks (PVBs) reported a significant 27.5 percent YoY rise in credit costs during Q2FY26. This surge is largely due to additional contingency and floating provisions made by two leading private banks, alongside one-time provisioning for discontinued crop loan variants.
While the transition to an ECL-based provisioning framework is on the horizon, and guidelines are yet to be finalized, some banks have begun to implement modest ECL-related provisions.
Conversely, public sector banks (PSBs) experienced a 17.7 percent YoY decrease in credit costs, as highlighted in the report.
Moreover, restructured assets across eight PSBs and PVBs have dropped to 0.52 percent of net advances as of Q2FY26, reflecting a reduction of approximately nine basis points from the preceding quarter.
Point of View
I believe this report on India's scheduled commercial banks signifies a turning point in asset management and financial stability. The reduction in GNPA indicates effective recovery measures and a commitment to improving asset quality, essential for boosting investor confidence and ensuring sustainable growth in the banking sector.
NationPress
20/11/2025
Frequently Asked Questions
What is the current GNPA ratio for India's scheduled commercial banks?
The current GNPA ratio for India's scheduled commercial banks is 2.1% as of Q2FY26.
How much has the GNPA declined compared to last year?
The GNPA has declined by 11.1% year-on-year, totaling Rs 4.05 lakh crore.
What factors contributed to the improvement in GNPA?
Strong recoveries, upgrades, lower incremental slippages, and portfolio clean-up through write-offs and ARC sales contributed to the improvement.
What is the NNPA ratio for SCBs in Q2FY26?
The NNPA ratio for SCBs is 0.5% for Q2FY26.
How have private sector banks fared in terms of credit costs?
Private sector banks experienced a 27.5% year-on-year increase in credit costs during Q2FY26.
