No listed bank has even 1% net NPA: A milestone for asset quality

This is a rare phenomenon in the Indian banking industry. What's more, nine banks have half a per cent or more net NPAs

What do the State Bank of India, HDFC Bank Ltd, Bank of Maharashtra and DCB Bank Ltd have in common? Well, all four, and, for that matter, all listed Indian banks – both private and government-owned – have less than 1 per cent net non-performing assets (NPAs) in the June quarter of FY27.

 

This is a rare milestone for the Indian banking industry. In the preceding March quarter, at least one lender (IndusInd Bank Ltd) had 1 per cent net NPAs.

 

What’s more, in the entire universe of listed Indian banks, only nine banks have half per cent or more (but less than 1 per cent) net NPAs – three public sector banks (PSBs) and six private banks. They are Bank of Baroda (50 basis points or bps), Bank of India (51 bps), City Union Bank Ltd (61bps), The Jammu & Kashmir Bank Ltd (60 bps), Punjab & Sind Bank (65 bps), DCB Bank Ltd (84 bps), Karnataka Bank Ltd (87 bps), Bandhan Bank Ltd (93 bps) and IndusInd Bank Ltd (95 bps). One basis point is one-hundredth of a percentage point.

 

On a quarter-on-quarter (QoQ) basis – comparing June quarter results with the March quarter – only four (three private banks and one public sector bank, or PSB) have seen higher net NPAs (in percentage terms), that too marginally. And, for seven of them (two private banks and five PSBs), there has been no change in net NPAs.

 

Bank of Maharashtra boasts the cleanest balance sheet with the lowest net NPA ratio at 13 bps, followed by Indian Bank (15 bps), IDBI Bank Ltd (16 bps), Tamilnad Mercantile Bank Ltd (17 bps), Federal Bank Ltd and Indian Overseas Bank (18 bps each) and Karur Vysya Bank Ltd (19 bps). These seven banks have less than 0.2 per cent net NPAs. Among the mega-lenders, State Bank of India (SBI) reported net NPAs of 38 bps, while HDFC Bank recorded 41 bps.

 

When it comes to gross NPAs, the scene is not that exciting. Only two banks – both private – have less than 1 per cent gross NPAs. They are Tamilnad Mercantile Bank (69 bps) and Karur Vysya Bank (74 bps). On the other end of the spectrum, two banks have more than 3 per cent gross NPAs. They too are private entities – IndusInd Bank (3.25 per cent) and Bandhan Bank (3.15 per cent). Five PSBs and four private banks have between 2.08 per cent and 2.78 per cent gross NPAs. SBI’s gross NPAs are 1.47 per cent while HDFC Bank’s sit at 1.17 per cent.

 

In absolute terms, gross NPAs of the listed banks are to the tune of ₹3.7 trillion in June, down 11.76 per cent from the year-ago period; and net NPAs are ₹84,293 crore, down 9.51 per cent. (All figures are rounded off.)

 

This steady depletion of bad debt, coupled with slowing fresh slippages, allowed banks to trim risk provisions. In the June quarter, total industry provisioning for bad debt fell to ₹25,448 crore—a sharp 41.61 per cent decline YoY. QoQ, however, there hasn’t been any significant change in the amount.

 

These lower provisions provided a direct boost to bottom lines. While the banking industry’s operating profit grew by a modest 4.5 per cent YoY, net profit surged 19.01 per cent to nearly ₹1.10 trillion – the highest ever quarterly profit – because of lower provisions. SBI led the profit ladder with ₹21,121 crore net profit, followed by HDFC Bank (₹19,060 crore) and ICICI Bank (₹14,805 crore). These three banks account for 50 per cent net profit of the industry! No other bank’s net profit has crossed the ₹10,000 crore mark. Four banks have crossed the ₹5,000-crore mark, though. They are Axis Bank Ltd (₹7,114 crore), Union Bank of India (₹5,332 crore), Bank of Baroda (₹5,304 crore) and Punjab National Bank (₹5,253 crore).

 

To assess the sustainability of profits, two metrics demand close attention: The low-cost current and savings account (CASA) ratio, and net interest margin (NIM)—loosely, the difference between what a bank pays on deposits and what it earns on advances.

 

Most banks have recorded a drop in CASA; for some of them, the drop is pretty sharp. For instance, RBL Bank Ltd’s CASA in the June quarter dropped to 25.2 per cent (of total deposits), from 32.5 per cent in the year-ago quarter. For CSB Bank, it dropped from 23.49 per cent to 19.41 per cent and that of Bank of India, from 39.88 per cent to 36.68 per cent.

 

IDFC First Bank commands the highest CASA ratio at 50.8 per cent, followed by Bank of Maharashtra (49 per cent), Central Bank of India (46.61 per cent), IDBI Bank (43.64 per cent), J&K Bank (42.06 per cent), Indian Overseas Bank (41.05 per cent) and Kotak Mahindra Bank (40.03 per cent). No other bank has 40 per cent or more CASA. SBI’s balance sheet holds 39.42 per cent CASA and HDFC Bank’s holds 32 per  cent.

 

Dropping CASA ratios naturally squeeze NIMs as the cost of deposits rise. Here, performance is mixed. On a YoY basis, both SBI and HDFC Bank experienced minor NIM contraction. Year-on-year, both SBI and HDFC Bank have recorded a decline in NIM. However, QoQ, HDFC Bank’s NIM has fallen sharply – from 3.38 per cent in March to 3.26 per cent in June. Its NIM was 3.35 per cent in the year-ago quarter. For SBI, it is 2.86 per cent in June 2026, versus 2.81 per cent in March and 2.9 per cent in June 2025.

 

Bandhan Bank commands the industry's highest NIM at 6.2 per cent, closely followed by IDFC First Bank (5.96 per cent). Kotak Mahindra Bank, ICICI Bank, Tamilnad Mercantile Bank, Karur Vysya Bank and RBL Bank enjoy 4 per cent or more NIM while Punjab National Bank has probably the least NIM – 2.5 per cent. In the pack of PSBs, no bank has 4 per cent or more NIM.

 

Of course, NIM in isolation does not tell the full story as it is intrinsically connected with the profile of a bank’s credit portfolio. Typically, banks with higher unsecured loans enjoy higher NIM as the cost of loans for consumers, not backed by collateral, is higher than that of secured loans but the trade-off lies in managing credit risk when cycles turn.

 

The June quarter data underlines the single biggest operational headache facing Indian banking today: Credit expansion continues to outpace deposit gathering by a wide margin. Overall, for all listed banks, year-on-year credit growth in the June quarter was 17.48 per cent but deposit growth is far lower, just 11.73 per cent.

 

For some of the banks, the difference between the growth in credit and deposits is too stark. For instance, IDBI Bank’s credit portfolio has grown 22.21 per cent but the rise in deposits is just 9.73 per cent; RBL Bank has seen 23.08 per cent credit growth while its deposit portfolio has grown 10.73 per cent; and Bandhan Bank’s credit portfolio has grown 16.42 per cent, almost two and a half times its deposit growth (6.61 per cent). Among the state-owned banks, SBI’s credit portfolio has grown 18.63 per cent versus 9.73 per cent deposit growth and Canara Bank has seen 17.97 per cent loan growth and 9.81 per cent growth in deposits. Sequentially, six banks have seen a decline in their deposit portfolios and two, a decline in credit books.

 

Whether recent inflows from NRI deposits and aggressive overseas bond issuances will bridge this liquidity deficit remains to be seen. But until deposit growth catches up, balance sheet management will remain a tightrope walk. 

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All figures relate to listed universal banks only. They don’t include small finance banks. The source for all the figures is Indus Equity. 

 

The writer is an author and senior advisor to Jana Small Finance Bank Ltd. His latest book: Roller Coaster: An Affair with Banking. To read his previous columns, log on to www.bankerstrust.in. X: @TamalBandyo