Banks’ NPAs to Remain Stable Despite West Asia Risks: CRISIL

India’s banking sector is expected to maintain stable asset quality, with gross non-performing assets (NPAs) projected to remain in the range of 2.0–2.2% by March 2027, according to a report by CRISIL.

The report indicates that despite emerging geopolitical risks, particularly tensions in West Asia, the overall impact on banks’ asset quality is likely to remain contained. Strong underwriting practices, improved credit discipline, and better balance sheets are contributing to this resilience.

According to the analysis, sectors such as retail lending and corporate credit have shown improved performance, supported by economic growth and stable repayment behaviour. Banks have also strengthened their risk management frameworks over the years, enabling them to absorb potential shocks.

However, the report cautions that certain sectors with exposure to global trade and energy prices could face stress if geopolitical tensions escalate. Volatility in crude oil prices and disruptions in supply chains may indirectly impact borrowers’ repayment capacity.

From a risk management perspective, banks are expected to continue monitoring sector-specific exposures, maintaining adequate provisioning, and strengthening credit assessment processes. Liquidity management and capital buffers will also play a crucial role in sustaining stability.

The outlook reflects a balanced scenario where strong domestic fundamentals offset external risks, ensuring that asset quality remains under control.

Overall, the banking sector appears well-positioned to navigate uncertainties while maintaining stable financial health.

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