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Banking Sector Loan Loss Provisioning Hits 3-Year High Amid Private Bank Surge
24 Aug
Summary
- Loan loss provisioning surged to 3-year high in June 2025
- Private banks saw significant rise, public banks reported decline
- Increase driven by one-off provisioning events and policy changes
According to the latest financial data, the banking sector's loan loss provisioning surged to a three-year high in the June 2025 quarter. This increase was largely driven by heightened provisioning by private sector banks, while their public sector counterparts (PSU banks) reported lower provisioning at the aggregate level.
For a sample of 29 banks, the NPA (non-performing asset) provisioning rose by 12% year-on-year and 16.2% from the previous quarter, reaching ₹28,883.6 crore. This was the highest level since the June 2022 quarter, when it had touched ₹29,120 crore.
The rise in provisioning was influenced by one-off provisioning events and policy changes at certain banks. For instance, HDFC Bank undertook prudential provisioning towards the stake sale in HDB Finance, while Axis Bank showed higher provisions due to a change in its provisioning policy.
Despite the increase, the report noted that credit costs across lending segments did not show any worrying signs, except for a "marginal blip" due to the seasonally weak June quarter. Looking ahead, the report suggests that slippages in the MSME (micro, small, and medium enterprises) segment are expected to slow down in the coming quarters, which may result in a moderation in provisioning.
