Rise in NPAs to hit banks' profits in FY26

Indian banks' profitability is at an 'inflexion point' in FY25 and is likely to moderate further in the fiscal afterwards, Ind-Ra said, adding that FY24 was the peak for profits

- OUR CORRESPONDENT

MUMBAI: Increase in bad assets will impact banks' profitability in FY26, a domestic rating agency said on Tuesday.

Indian banks' profitability is at an "inflexion point" in FY25 and is likely to moderate further in the fiscal afterwards, India Ratings and Research (Ind-Ra) said, adding that FY24 was the peak for profits.

"Profitability is expected to moderate further in FY26 with an expectation of rising slippages and higher credit costs over the FY24 levels which was at decadal lows," the agency's head and director financial institutions Karan Gupta told reporters here.

A bulk of the asset quality stress will emanate from the unsecured retail exposure, Gupta said, stressing that the same is "manageable" and will not have any systemic ramifications.

The under Rs 50,000 retail unsecured portion accounts for around 0.4 per cent of the banking credit, while only 3.6 per cent of the advances are the ones having a lending rate of over 11 per cent, the agency said.