RBI stress test flags rising NBFC stress, capital buffers to thin by FY27

Mumbai | The Reserve Bank of India's latest Financial Stability Report has projected a steady rise in stressed assets among non-banking financial companies (NBFCs) over the next year, even as capital buffers are expected to shrink under adverse economic scenarios.

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.

Despite the overall buffer remaining comfortably above the regulatory floor, the stress test revealed pockets of vulnerability within the sector. 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.

The findings underscore the RBI's continued vigilance over the NBFC sector, which has seen rapid credit growth in recent years alongside growing regulatory scrutiny on asset quality and capital resilience.