Indian banks set to benefit from tighter oversight in 2026

The RBI’s multiple reforms over the next year will allow banks to provision more effectively.

Indian banks are set to benefit from enhanced regulatory oversight in 2026, which should reduce systemic risks and support a better operating environment, according to Fitch Ratings.

Weaknesses that contributed to the last non-performing loan spike— March 2016 and in 2018— have significantly reduced, the rating agency said in a report on January 2026.

The Reserve Bank of India (RBI) recently announced multiple reforms, including plans to align more closely with IFRS 9 by adopting a forward-looking expected credit loss (ECL) framework from 1 April 2027. This should allow banks to provision more effectively through the risk cycle, Fitch said.

Banks are also better positioned to monitor and control loan risks, Fitch added.

“The Central Repository of Information on Large Credits, established in 2014, has been effective in containing risks associated with large corporate loans, whilst improved retail credit bureau data access and reporting have reduced risk of a significant build-up of retail stress,” it said in the 2026 report.

Since 2019, key steps made by regulators include the withdrawal of regulatory asset quality forbearance, the implementation of large-exposure frameworks, the introduction of capital requirements that exceed Basel III standards, and enhanced supervisory enforcement.

Banks have also benefitted from the implementation of an insolvency and bankruptcy regime, which has resolved INR12t (US$135b) in problem loans since its launch in 2016, Fitch said.