If the situation worsens due to the further intensification of geopolitical risks, elevated energy prices and exchange rate pressures, leading to rise in domestic inflation and growth slowdown during 2026-27, bank’s core capital may decrease to 11.6% in an adverse scenario and further to 11.4% by March 2028 in a more severely adverse scenario, RBI said.
While the gross non performing assets (NPAs) of 46 banks may edge up from 1.8% in March 2026 to 1.9% by March 2028 under the baseline scenario. It may rise to 3.8% and 4.1% under adverse scenarios 1 and 2, respectively, the RBI said.
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In a case of a severe shock scenario, where the aggregate GNPA ratio of 46 select banks is assumed to move up to 8.1%, the core capital ratio will reduce by 420 basis points but still remain above the respective regulatory minimum levels.
Assuming that the top three group borrowers default, the GNPA ratio would rise by 510 basis points and core capital ratios would declines by 130 basis points, but even under such extreme scenarios, all banks would be able to maintain their capital ratios above the respective regulatory minimum levels.
RBI also carried out a liquidity stress test to assess the impact of plausible run on deposits, and increased demand for unutilised portions of committed credit and liquidity facilities of banks.“The results showed that the aggregate LCR (liquidity coverage ratio) of the select SCBs would fall from 123.7 per cent in the baseline scenario to 116.7 per cent in stress scenario 1 and further to 110.8 per cent in stress scenario 2. Individually, under the more severe stress scenario 2, three banks would fail to meet the regulatory minimum LCR. Among bank groups, the impact is highest for public sector banks (decline of 13.9 percentage points under stress scenario 2),” RBI said.
According to the system-level stress test conducted on 174 NBFCs, the gross non-performing assets (GNPA) ratio could climb from current levels to 2.4% by March 2026 and further to 2.8% by March 2027 under the baseline scenario. The deterioration is projected to be sharper under stress conditions, with the GNPA ratio rising to 4% under a medium stress scenario and as high as 5.2% in a severe stress situation.
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The report also pointed to a gradual erosion in capital adequacy. The aggregate Capital to Risk-weighted Assets Ratio (CRAR) for the sector, currently at 22.3% as of March 2026, is expected to dip to 20.8% by March 2027 under the baseline scenario. Under more adverse conditions, the ratio could fall further to 20.2% in the medium stress scenario and 20% in the severe stress scenario.
As many as 7 NBFCs could breach the minimum regulatory CRAR requirement of 15% even under the baseline scenario, the RBI said. This number nearly doubles under stress, with 15 NBFCs projected to fall short of the threshold under both the medium and severe stress scenarios.