NPA provisions fall for a second quarter as banks sustain asset quality

By

, ET BureauLast Updated: Sep 11, 2026, 06:03:00 AM IST

Synopsis

Aggregate loan loss provisioning by banks dropped significantly year-on-year. This decline was driven by improving asset quality and fewer fresh slippages. Provision coverage ratios also reduced the need for fresh funds. Public sector banks saw a 19.8 percent fall in provisioning. Private sector banks registered a sharper 33.6 percent reduction in provisioning.

ET Intelligence Group: The aggregate loan loss provisioning by banks in the June 2026 quarter dropped in double digits year-on-year for the second straight quarter, led by improving asset quality and lower fresh slippages. Additionally, a provision coverage ratio of 75% and above for the majority of banks has reduced the need to set aside fresh funds to cover legacy loans thereby reducing the overall burden on quarterly provisioning.

For a sample of 29 banks, provisioning for non-performing assets (NPA) fell by 27.3% to ₹21,314 crore.

The number of banks that reported a drop in NPA provisioning from the year-ago level was at 23 for the second straight quarter, the highest since the March 2022 quarter, when 25 banks in the sample had reported lower provisioning.

ET Bureau

The overall corporate debt quality has been gradually improving over the past five years. The CareEdge Debt Quality Index (CDQI) was 97.2 in July 2026 compared with 94.9 two years ago and around 90 five years ago.

Read more: Karan Adani settles PMC Projects case with Sebi by paying Rs 13.65 lakh

For the public sector (PSU) banks in the sample, NPA provisioning fell by 19.8% to ₹10,717 crore. The private sector banks registered a sharper fall of 33.6% at ₹10,597.5 crore. In the total sample, eight out of 12 PSU banks and 15 out of 17 private sector banks reported year-on-year reduction in NPA provisioning.

For State Bank of India, the country's largest bank by the loan book size, NPA provisioning fell by 31.9% year-on-year to ₹3,359 crore.

On a sequential basis, however, NPA provisioning increased by 10.4% in the June quarter, led by increased provisioning from the private sector banks. Their provisioning rose by 46.4% from the previous quarter. On the other hand, PSU banks reported a fall of 11.3%.

...moreless

...moreless