Small finance banks’ asset quality to improve, GNPA to drop by 120 basis points by March 2027: Crisil

Kolkata: are likely to see an improvement in their asset quality this financial year, with their (GNPAs) projected to decline by about 120 basis points to 2.6-2.8% by March 2027, said.

Their GNPAs stood at 3.8% and 4.4% at March-end this year and last year, respectively.

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Crisil Ratings said the improvement would be driven by a recovery in the of the , alongside continued growth and increasing contribution from the non-microfinance portfolio, where asset quality is expected to remain stable.

” by SFBs (small finance banks) has improved borrower selection, materially strengthening the asset quality of microfinance portfolios,” said Aparna Kirubakaran, director, Crisil Ratings.

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Gross NPAs from the microfinance book are likely to ease to 3.8-4% by March 2027 from 7.6% at the end of 2025-26, after having declined from a peak of 8.4% recorded a year earlier, according to the rating agency.

caused significant credit stress in the microfinance portfolio during the past two fiscals.