India's NPA crisis recedes to 2-2.5% as banking sector stabilises

India's banking sector has moved past its stressed-asset crisis. Moody's Ratings now projects NPAs will hold between 2-2.5% over the next 12-18 months—a marked departure from the 11% levels recorded in 2018. The turnaround signals not just recovery, but structural improvement in asset quality across the system.

Three pillars underpin this stability. First, projected GDP growth of 6.4% for FY26-27 provides the macroeconomic tailwind needed for borrower repayment. Second, credit growth has stayed disciplined, growing in sync with deposit mobilisation rather than outpacing it. Third, banks have sharpened risk management frameworks and asset quality monitoring capabilities.