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India NBFCs Face Rising Bad Loans

30 Jun

Summary

Stressed assets may reach 2.8% by March 2027.
Capital buffers could decline to 20.8% soon.
Several lenders might breach minimum capital requirements.

The Reserve Bank of India (RBI) has projected an increase in stressed assets for non-banking financial companies (NBFCs) over the next year, alongside a potential decrease in capital buffers. System-level stress tests indicate that the gross non-performing assets (GNPA) ratio could rise to 2.8% by March 2027 under a baseline scenario. This deterioration is expected to be more pronounced during economic stress.

The aggregate Capital to Risk-weighted Assets Ratio (CRAR) for the sector is anticipated to decline to 20.8% by March 2027 under normal conditions. However, the stress test revealed that several NBFCs could breach the minimum regulatory CRAR requirement of 15%, particularly under adverse economic scenarios. This highlights the RBI's ongoing focus on the sector's resilience.

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