The retail loan books of both private and public sector banks had increased sharply in the years following the pandemic as banks chased loans from individuals to grow their business. Sharp practices adopted by some of these lenders, as highlighted by the RBI, have led to an increase in risk and bad loans in these loan portfolios.

However, data revealed as a response to an unstarred question in the Lok Sabha show that the largest lenders, such as SBI, HDFC Bank and ICICI Bank, have managed to contain the gross non-performing assets (GNPA) in retail loans between April and December 2025. But, many private sector banks, led by Axis Bank, have continued to register a rise in bad loans in the retail loan book.

More prudence

In absolute terms, State Bank of India reported the highest retail GNPA at ₹11,168 crore as of December 31, 2025. This was, however, almost unchanged from the ₹11,109 crore at the end of March 2025. HDFC Bank, which has the second-largest retail loan GNPA, recorded a decline of 8 per cent in the first three quarters of FY26. ICICI Bank, too, recorded a decline of 11 per cent.

RBI’s regulatory tightening, along with revival in credit demand from the industry appears to have made larger banks exercise more prudence in retail lending. An increase in interest rates also appears to have decreased demand in this segment.

Private vs public

But, many private sector banks have reported higher growth in retail GNPAs. Axis Bank witnessed the steepest increase between April and December 2025, rising 23 per cent to ₹7,381 crore. IDBI Bank followed with 21.64 per cent growth. Bandhan Bank, IDFC First and IndusInd Bank were other private lenders in the top six, recording the highest growth in retail GNPAs. Bank of Baroda was the only public sector lender in the list. 

In contrast, public sector banks topped the list of banks recording the highest decline in retail GNPAs. Indian Bank reported the steepest fall, with retail GNPA declining 39 per cent to ₹958 crore. Canara Bank saw a 37 per cent drop to ₹1,451 crore. Bank of India, Punjab National Bank, and Union Bank of India also posted double-digit declines. Federal Bank was the only private sector lender in this list.

Prof Anil Sood, Institute for Advanced Studies in Complex Choices (IASCC), noted that PSBs are structurally less exposed to retail risk. “PSBs are not major players in the retail market and, therefore, the pressure to grow their retail loan book is limited. It is, therefore, not surprising that the quality of their retail assets at this stage is better than that of the private sector, who are often chasing volume for growth,” he said, adding that PSBs have a lower share in credit cards and unsecured personal loans.

Vivek Iyer, Partner and Financial Services Risk Leader, Grant Thornton Bharat, said divergence among peers reflects differences in risk appetite. “Customer acquisition strategies of banks are designed based on the demographic profile aligned very closely to the risk profile of the financial institutions,” he said. 

Experts say that while retail credit growth may be nearing its peak, GNPA levels could rise for a few more quarters before stabilising, highlighting the need for disciplined lending.

Published on March 20, 2026