New Delhi: The Gross Non-Performing Asset (GNPA) ratio of India’s scheduled commercial banks (SCBs) improved to 2.1 per cent in the second quarter of FY26, down from 2.6 per cent in the same quarter last year, CareEdge Ratings said in a report released on Thursday.
In value terms, GNPAs fell 11.1 per cent year-on-year to ₹4.05 lakh crore. The report noted that the Net NPA (NNPA) ratio remained stable at 0.5 per cent for the third straight quarter, compared to 0.6 per cent in Q2FY25, with total NNPAs declining 9.9 per cent to ₹0.88 lakh crore.
CareEdge attributed the improvement in both indicators to strong recoveries, upgrades, reduced incremental slippages, and portfolio clean-up measures such as write-offs and asset sales to ARCs. Sequentially, GNPAs and NNPAs dropped 4.2 per cent and 5.1 per cent, respectively, supported by lower slippages, continued recoveries and upgrades, and higher NPA resolutions through ARC transactions.
The report said aggregate provisioning by SCBs rose modestly by 1.4 per cent year-on-year in Q2FY26. However, the annualised credit cost ratio eased to 0.41 per cent from 0.45 per cent a year ago, reflecting stronger asset growth relative to the increase in provisioning.
Private sector banks saw a sharper 27.5 per cent rise in credit costs during the quarter, driven largely by additional contingency and floating provisions at two major private lenders, as well as one-time provisioning related to discontinued crop loan variants. With India preparing to transition to an Expected Credit Loss (ECL)-based provisioning framework, some banks have already begun setting aside modest ECL provisions, though final guidelines are still awaited.
In contrast, public sector banks reported a 17.7 per cent year-on-year decline in credit costs.
The report also highlighted that restructured assets across eight major PSBs and PVBs fell to 0.52 per cent of net advances in Q2FY26, marking an improvement of around nine basis points from the previous quarter.
