Banks' profits to moderate in FY26 as bad assets rise

Increase in bad assets will impact banks' profitability in FY26, a domestic rating agency said on Tuesday.

- Press Trust of India

MUMBAI:

Indian banks' profitability is at an "inflexion point" in FY25 and is likely to moderate further in the fiscal afterwards, India Ratings and Research said, adding that FY24 was the peak for profits.

"Profitability (is)... expected to moderate further in FY26 with an expectation of rising slippages and higher credit costs over the FY24 levels which was at decadal lows," the agency's head and director financial institutions Karan Gupta told reporters here.

A bulk of the asset quality stress will emanate from the unsecured retail exposure, Gupta said, stressing that the same is "manageable" and will not have any systemic ramifications.

The under ₹50,000 retail unsecured portion accounts for around 0.4% of the banking credit, while only 3.6% of the advances are the ones having a lending rate of over 11%, the agency said.