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Key Points

Indian banks experienced mixed results in the first quarter of FY26. Credit costs increased significantly while asset quality showed marginal improvement overall. Public sector banks actually performed better than their private counterparts in controlling credit costs. The report highlights ongoing challenges in microfinance and unsecured lending segments affecting some banks.

Key Points: Bank Credit Costs Rise to 0.61% as GNPA Improves to 2.3% in Q1FY26

  • Credit costs increased 19 bps YoY to 0.61% for scheduled commercial banks
  • Gross NPA ratio improved to 2.3% from 2.7% year-over-year
  • Public sector banks outperformed with lower credit costs at 0.35%
  • Private banks saw credit costs rise to 1.02% due to higher provisions
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Credit costs for banks rise in Q1FY26, GNPA improves marginally YoY: Report

Indian banks see credit costs rise 19 bps YoY while GNPA ratio improves to 2.3%. PSBs show better performance than private banks in latest CareEdge Ratings report.

"NNPA ratio of SCBs remained at 0.5 per cent in Q1FY26 for the second consecutive quarter - CareEdge Ratings Report"

New Delhi, Aug 20

The amount of loans disbursed by Scheduled Commercial Banks (SCBs) in India grew 9.5 per cent YoY in Q1FY26, slightly lagging deposit growth at 10.1 per cent, with growth expected to remain moderate ahead, a report said on Wednesday.

The credit cost of SCBs increased by 19 bps YoY, and also a marginal improvement in asset quality was seen for the quarter, with the Gross Non-Performing Asset (GNPA) ratio declining to 2.3 per cent from 2.7 per cent a year earlier, CareEdge Ratings said in its report.

GNPA levels improved by 9.5 per cent YoY to Rs 4.18 lakh crore as of Q1FY26, driven by steady recoveries, upgradations, and write-offs, particularly among Public Sector Banks (PSBs).

The Net Non-Performing Asset (NNPA) ratio held steady even as GNPAs edged up 0.5 per cent sequentially every quarter due to increased slippages in microfinance and unsecured lending segments at select banks.

"NNPA ratio of SCBs remained at 0.5 per cent in Q1FY26 for the second consecutive quarter against 0.6 per cent over a year ago. NNPAs reduced by 8.7 per cent YoY to Rs 0.92 lakh crore as of Q1FY26," the report said.

Credit cost (annualised) of SCBs increased by 19 bps sequentially on an annual basis to 0.61 per cent in Q1FY26. However, for PSBs, it decreased by six bps YoY to 0.35 per cent in Q1FY26, while for PVBs, it increased to 1.02 per cent during the same period.

Sequentially, NNPAs for PSBs decline marginally by six bps, while for PVBs they rose by 51 bps.

The uptick in credit cost among PVBs was primarily driven by higher provisions at a large private bank, mainly on account of technical accounting adjustments, alongside increased slippages reported by a few other PVBs during the quarter.

–IANS

- IANS

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Reader Comments

P
Priya S
The microfinance and unsecured lending segments are showing increased slippages. Banks need to be more careful with these high-risk loans. Common people suffer when banks make reckless lending decisions.
A
Arjun K
PSBs showing better performance with credit cost decreasing to 0.35% while PVBs increased to 1.02%. Maybe government banks are finally getting their act together after all these years of struggle.
S
Sarah B
As an NRI investor, these numbers are encouraging. The steady recovery in asset quality makes Indian banking sector more attractive for foreign investments. Hope this trend continues! 🇮🇳
V
Vikram M
While the improvement is good, we must remember that these are still early days. The banking sector needs sustained improvement over multiple quarters to regain complete investor confidence.
K
Kavya N
The fact that NNPA ratio held steady at 0.5% is actually quite impressive given the economic challenges. Recovery of Rs 4.18 lakh crore in NPAs is no small achievement! 👏

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