Coverage: Q2 2026 · Information to 25 September 2026

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Published: 25 September 2026  |  Region: Asia-Pacific  |  Country: India  |  Coverage: Q2 2026 (April–June 2026)  |  Classification: Premium Intelligence

Desk view — India, Q2 2026

  • Credit has re-accelerated sharply. Bank credit grew 16.5% year on year at end-June 2026, against 9.9% a year earlier, and borrowing by private companies rose 21.1%. Deposits grew 11.5%.
  • Asset quality improved further: the gross NPA ratio of scheduled commercial banks fell to 1.8% at end-March 2026, with a capital adequacy ratio of 17.7%.
  • The RBI has held the repo rate at 5.25% at every meeting since the December 2025 cut, most recently on 5 August 2026, while flagging an inflation peak in October–December 2026.
  • The top five banks earned a combined ₹66,223 crore in the April–June quarter, about 12% more than a year earlier. Profit growth ranged from 5.0% at HDFC Bank to 26% at Kotak Mahindra Bank.
  • The economy grew 7.8% in real terms in April–June 2026, well ahead of the RBI’s 7.0% projection. CPI inflation rose to 4.38% in June and 4.82% in August.
Real GDP growth
7.8%
Q1 FY27 (Apr–Jun 2026), y/y · MoSPI
Repo rate
5.25%
Held on 5 August 2026 · RBI MPC
Bank credit growth
16.5%
End-June 2026, y/y · RBI BSR-1
Gross NPA ratio
1.8%
End-March 2026, SCBs · RBI FSR
Capital adequacy
17.7%
End-March 2026, SCBs · RBI FSR
CPI inflation
4.38%
June 2026, y/y · MoSPI

Executive summary

India’s banks came through the April–June 2026 quarter, which is the first quarter of the 2026-27 financial year (Q1 FY27), with strong growth and clean balance sheets. Real GDP grew 7.8% year on year in the quarter, according to the Ministry of Statistics and Programme Implementation (MoSPI), and gross fixed capital formation grew 11.9%. Bank credit grew 16.5% year on year at end-June 2026, the Reserve Bank of India’s (RBI) quarterly data show, up from 9.9% a year earlier. Deposits grew more slowly, at 11.5%.

The main risk is inflation, not credit quality. The conflict in West Asia has pushed up energy prices, and CPI inflation rose from 3.48% in April to 4.38% in June and 4.82% in August. The RBI’s Monetary Policy Committee (MPC) left the repo rate at 5.25% on 8 April, 5 June and 5 August 2026 and expects inflation to peak at 5.9% in October–December. The RBI’s June 2026 Financial Stability Report put the gross non-performing asset (NPA) ratio at 1.8% and the capital adequacy ratio at 17.7% at end-March 2026. For bank boards, the question is how to fund loan growth that is running well ahead of deposit growth.