RBI stress test: Banks hold capital, NBFCs show cracks

The Reserve Bank of India's latest stress test found the banking system can absorb severe credit losses without breaching minimum capital requirements at the aggregate level. The catch is at the edges: one or two banks and as many as 15 non-banking finance companies would fall below regulatory thresholds under the worst scenarios.

The Financial Stability Report, released Tuesday, models capital and asset quality for 46 scheduled commercial banks and 174 NBFCs over a two-year horizon. Under the baseline scenario – which follows the RBI's own forecast path for growth, inflation, and interest rates – the aggregate capital-to-risk-weighted-assets ratio for banks slips from 17.5% in March 2026 to 15.6% by March 2028. That is still well above the 9% minimum.

Under two adverse scenarios, the aggregate CRAR drops to 13.3% and 13.0%, respectively. The RBI said no bank would breach the 9% floor under the baseline. One bank falls below it under adverse scenario 1; two banks under adverse scenario 2. The central bank did not name the institutions.

Asset quality holds up better than capital. The aggregate gross non-performing asset ratio for the 46 banks edges up from 1.8% in March 2026 to 1.9% under the baseline. It rises to 3.8% and 4.1% under the two stress scenarios. That is a manageable jump from a low base, though the absolute NPA stock would still be significant.