Crisil Ratings projects that small finance banks’ asset quality will improve and gross non-performing assets (GNPAs) will fall by about 120 basis points by March 2027. The agency expects GNPA levels to move to roughly 2.6–2.8% by that date, from 3.8% at the end of this year, and from 4.4% at the end of last year.
The outlets attribute the expected improvement to better credit performance across portfolios. Crisil cites tighter underwriting and stronger borrower selection, which it says materially improves asset quality in microfinance lending. It also points to higher recoveries and continued growth in small finance banks’ non-microfinance business, where asset quality is expected to remain broadly stable. Crisil also notes that microfinance GNPA is expected to ease to around 3.8–4% by March 2027, down from 7.6% at the end of 2025–26, after a peak of 8.4% a year earlier, following stress tied to borrower over-indebtedness.
