Bank NPAs decline to 2%, no systemic hit due to Middle East conflict: RBI

New Delhi: Indian scheduled commercial banks' gross non-performing assets (NPAs) ratio declined further to 2 percent in December 2025, the Reserve Bank said on Wednesday.

Gross NPAs, which represents the proportion of loans unpaid for over 90 days, for the banking system had stood at 2.5 percent in the year-ago period, as per the bi-annual Monetary Policy Report released by the central bank.

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The improvement in asset quality was across sectors, including retail loans, services, industry, and agriculture.

NPAs in retail loans eased to 1 per cent, services eased to 1.7 per cent, industry eased to 1.8 per cent, and agriculture eased to 5.7 percent in December 2025.

It can be noted that NPAs have been improving for many quarters now, reflecting sustained recoveries, upgrades, and write-offs.

Amid concerns about the likely impact of the West Asia conflict and the costs extracted through supply chain disruptions, the RBI said there is no need to worry about the same.

Replying to a specific question on whether it sees any incipient stress because of the supply chain disruptions, RBI Governor Sanjay Malhotra said, "From the banks' side, we are not seeing any systemic concerns with regard to their profitability and their health."

He added that there will be pockets and sectors that will be hit because of the present crisis.

Further, on the credit growth front, the central bank's report said it recorded a robust growth during H2FY26, owing to monetary policy easing and strong economic activity.

Growth in bank credit of scheduled commercial banks accelerated to 13.8 per cent year-on-year as on March 15, 2026 from 11 percent a year ago.

Across bank groups, credit growth of foreign banks remained the highest at 14.7 percent year-on-year, followed by public sector banks and private banks.

As on March 15, 2026, public sector banks accounted for the largest share of incremental credit year-on-year.

However, credit growth has accelerated for private banks in recent months, leading to improvement in their share in incremental credit, the RBI said.

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Banks' non-statutory liquidity ratio (non-SLR) investments (comprising CPs, bonds, debentures and shares of public and private corporates) grew moderately by 2.7 per cent in H2FY26 (up to March 15) due to decline in commercial paper (CP) holdings.

Growth in adjusted non-food credit (non-food bank credit plus banks' non-SLR investments) increased to 13.5 per cent year-on-year in Q4FY26 (up to March 15) from 10.8 per cent in Q4FY25.

As on February 28, 2026, excess holdings of SLR securities by SCBs moderated to 6.3 per cent of their NDTL from 7.3 per cent at end-March 2025 as banks brought down their investment portfolio to fund credit demand.

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