New Delhi, Nov 20 (IANS) The Gross Non-Performing Asset (GNPA) ratio of scheduled commercial banks (SCBs) improved to 2.1 per cent as of the second quarter of the current financial year (Q2FY26) from 2.6 per cent a year earlier, a report said on Thursday.

Meanwhile, the GNPA declined 11.1 per cent year-on-year (YoY) to Rs 4.05 lakh crore.

“In comparison, the Net Non-Performing Asset (NNPA) ratio remained steady at 0.5 per cent for the third consecutive quarter as compared to 0.6 per cent in Q2FY25, with NNPAs falling 9.9 per cent YoY to Rs 0.88 lakh crore,” CareEdge Ratings said in its report.

Both metrics improved due to strong recoveries and upgrades, lower incremental slippages, and portfolio clean-up through write-offs and sales to ARCs.

Sequentially, SCBs’ GNPAs and NNPAs declined by 4.2 per cent and 5.1 per cent, respectively, driven by lower incremental slippages along with recoveries and upgrades, and increased NPA resolutions through ARC sales, reflecting sustained improvement in asset quality.

According to the report, SCBs aggregate provisioning rose marginally by 1.4 per cent YoY in Q2FY26; however, the credit cost (annualised) ratio eased to 0.41 per cent in Q2FY26 from 0.45 per cent a year ago, reflecting stronger growth in assets compared to a rise in provisioning.

Meanwhile, Private sector banks (PVBs) experienced a 27.5 per cent YoY increase in credit costs during Q2FY26, mainly due to extra contingency and floating provisions made by two major private banks, as well as one-time provisioning related to discontinued crop loan variants.

Although the shift to an ECL-based provisioning framework is imminent and guidelines are still to be finalised, some banks have started making modest ECL-related provisions.

In comparison, public sector banks (PSBs) reported a 17.7 per cent year-on-year decline in credit costs, the report noted.

At the same time, restructured assets (across eight PSBs and PVBs) declined to 0.52 per cent of net advances as of Q2FY26, marking a reduction of around nine basis points from the previous quarter.

–IANS

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