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Indian Banks & NBFCs Show Strong Capital Buffers, Improved Resilience

A report by Brickwork Ratings states India's banking system and NBFCs have shown improved financial resilience, supported by comfortable capital buffers and stabilizing asset quality. Scheduled commercial banks maintain capital adequacy ratios around 17%, significantly above the regulatory minimum of 9-11.5%. While public sector banks have strengthened through improved earnings and government infusions, private banks benefit from efficient capital management. The capital landscape for NBFCs is mixed, with large entities holding strong buffers but mid-sized and smaller ones facing funding cost pressures.

Key Points: Indian Banks, NBFCs Show Strong Capital Position: Report

  • Capital adequacy ratios well above regulatory minimums
  • Public sector banks strengthened via earnings & govt infusion
  • Private banks benefit from efficient capital management
  • Large NBFCs maintain healthy buffers, smaller ones face pressure
2 min read

Indian banks, NBFCs show strong capital position and improved financial resilience: Report

Report highlights improved capital adequacy, asset quality, and profitability in Indian banking and NBFC sectors, ensuring resilience against stress.

"The Indian banking system is currently well capitalized, with buffers that provide adequate headroom for growth and resilience against potential stress. - Hemant Sagare"

New Delhi, Jan 20

India's banking and non-banking financial companies showed improved financial resilience on the back of comfortable capital including buffers, stabilising asset quality, and profitability, a report said on Tuesday.

The report from domestic credit rating agency Brickwork Ratings said that scheduled commercial banks reported capital adequacy ratios (CAR) well above the minimum regulatory requirements, with system-wide levels around 17 per cent.

CAR is the measure of a bank's ability to absorb losses from bad loans, and to support its business growth.

The RBI mandates a minimum total CAR of 9 per cent for banks and of 11.5 per cent including Capital Conservation Buffer for banks. Public sector banks have significantly strengthened their capital positions following an improving earnings profile caused by an improvement in asset quality, apart from government infusions, the report said.

Meanwhile, private sector banks continue to benefit from efficient capital management and diversified portfolios.

"The Indian banking system is currently well capitalized, with buffers that provide adequate headroom for growth and resilience against potential stress," said Hemant Sagare, Director - Ratings (BFSI), Brickwork Ratings. "This strength reflects improved profitability, better asset quality, and disciplined risk management across the sector," he said.

Maintaining high-quality capital and strong internal capital generation will be critical to sustaining confidence and supporting long-term growth, Sagare added.

Among NBFCs, the capitalisation landscape remained mixed with large NBFCs maintaining healthy buffers, supported by better access to equity markets, diversified funding profiles, and stronger governance.

In contrast, mid-sized and smaller NBFCs faced relatively higher pressure due to increased funding costs, reliance on wholesale borrowings, and tighter investor selectivity.

The ratings agency forecasted Indian banks to maintain CAR above minimum capital requirements even under adverse macroeconomic scenarios, including geopolitical risks and global growth slowdowns.

A recent report said that the Reserve Bank of India's intervention on priority sector lending and agriculture book adjustments weighed on earnings of the December quarter but analysts said these were short-term factors.

Non-banking financial companies could emerge as the standout performers during the earnings season, they added.

- IANS

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Reader Comments

S
Shreya B
Good to hear, but I hope this financial strength translates to better service for the common man. My public sector bank branch still takes forever for simple tasks. Efficiency should improve alongside capital ratios.
A
Aman W
The part about smaller NBFCs facing pressure is concerning. Many people in tier 2/3 cities rely on them for loans. Hope RBI keeps an eye so that credit flow to smaller businesses doesn't dry up.
P
Priyanka N
As someone who invests in bank stocks, this report is music to my ears! 🎶 Stable and well-capitalized banks mean more consistent dividends and less volatility. Private banks seem to be doing especially well.
K
Karthik V
The government's capital infusion into PSBs seems to have paid off. It was taxpayer money, so it's a relief to see it being used effectively to strengthen the system. Now, focus should be on full privatization for even better performance.
M
Michael C
Reading this from a global perspective, India's banking resilience is impressive, especially when many economies are facing headwinds. Strong domestic institutions are key to weathering global slowdowns mentioned in the report.

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