Private banks to see a higher rise in NPAs than public peers in FY27

By

, ET BureauLast Updated: Apr 23, 2026, 06:23:00 AM IST

Synopsis

Private banks anticipate a faster rise in bad loans by FY27 compared to public sector banks. This trend is driven by increased exposure to unsecured retail and MSME loans. Stress is growing in these segments, impacting the rural economy. The West Asia conflict adds uncertainty, with potential job losses in the IT sector being monitored for personal loan performance.

Private banks are set to generate bad loans at a significantly faster clip than their public sector peers in FY27, according to rating agency ICRA. Fresh NPA generation at private banks is estimated to rise to 2.0% in FY27 from 1.8% in FY26— against 1.2% for public sector banks, up from 0.9% in FY26.

Agencies

The divergence reflects private banks’ higher exposure to unsecured retail and MSME advances, which have been the primary source of stress across the sector. ICRA flags that the stress is increasingly concentrated in the MSME and retail segments, with the rural economy seen as bearing the brunt. The ongoing West Asia conflict adds a further layer of uncertainty, with potential job losses — particularly in the IT sector — flagged as a watch item for personal loan performance.

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