Indian lenders are expected to gain from stronger regulatory supervision in 2026, which is likely to lower systemic risks and improve operating conditions, Fitch Ratings said.
The vulnerabilities that drove the surge in non-performing loans in March 2016 and again in 2018 have diminished substantially, the agency noted in a January 2026 report.
Fitch highlighted recent Reserve Bank of India (RBI) reforms, including plans to move closer to IFRS 9 by introducing a forward-looking expected credit loss (ECL) provisioning framework from 1 April 2027. This shift should enable banks to build provisions more efficiently across economic cycles.
According to Fitch, banks are now better equipped to track and manage credit risks. The Central Repository of Information on Large Credits, set up in 2014, has helped curb risks tied to large corporate exposures, while improved access to and reporting of retail credit bureau data has reduced the likelihood of a sharp build-up in household loan stress.
Since 2019, regulators have also withdrawn asset quality forbearance, enforced large-exposure limits, introduced capital requirements above Basel III standards, and strengthened supervisory oversight.
In addition, banks have benefited from India’s insolvency and bankruptcy framework, which has resolved INR12 trillion ($135 billion) of stressed assets since its introduction in 2016, Fitch said.
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