ET Graphics: Despite MFI pressure, bad loans seen at 15-year low

The share of bad loans is expected to remain at a 15- year low of around 2.3%– 2.4%, in FY26 as pressure from unsecured personal loans and microfinance institutions (MFIs) is offset by corporate deleveraging and a continued decline in the gross non-performing assets ( GNPA), as per a report by Care Ratings.

As of the June 2025 quarter, system-level GNPA ratio had declined to 2.3%, compared to 2.7% a year ago. GNPA of the banking system reduced by 9.5% year-on year (y-o-y) to Rs 4.18 lakh crore as of Q1FY26. Though bad loans of private sector banks rose by 7.6% y-o-y, driven by an increase in slippages and stress in the microfinance portfolio.

Saloni Shukla takes a look at the asset quality situation in the banking sector.