New Delhi, [India] August 25 : Strong loan growth, improving asset quality and solid capitalisation are supporting the resilience of Indian banks, with HDFC Bank and ICICI Bank emerging as the strongest performers among major lenders, according to a Bank of America (BofA) Global Research report.
The report, said Indian banks delivered strong first-quarter FY27 results, with loan growth helping offset pressure on margins. It noted that the sector's average net profit rose 13.4 per cent year-on-year in the quarter.
Loan growth also showed a significant recovery. Average loan growth reached 18 per cent year-on-year in the first quarter of FY27, while average total assets and risk-weighted assets grew 13.6 per cent and 12 per cent, respectively.
"Average loan growth recovered to 18% YoY in 1QFY27, while total assets/RWA on average grew 13.6%/12.0% YoY, respectively," the report said, noting that margin pressure was mainly mitigated by stronger loan growth and higher non-interest income.
BofA said asset quality continued to improve across the banking sector. The gross and net non-performing loan ratios stood at 1.5 per cent and 0.4 per cent, respectively, at the end of June 2026, down 29 basis points and 7 basis points year-on-year.
"As of end-1QFY27 (calendar-year 2Q26), major Indian banks maintained broadly resilient credit profilse, supported by improving asset quality and solid capitalization." the report said, while noting that the average Common Equity Tier 1 (CET1) ratio remained strong at 15.1 per cent.
The report said HDFC Bank and ICICI Bank reported stronger fundamentals than their peers, with CET1 ratios of 17.4 per cent and 16.25 per cent, respectively. Their gross and net NPL ratios were also among the lowest among major Indian banks at the end of June.
BofA highlighted that private sector banks continued to show stronger capital positions than public sector lenders, with CET1 ratios of 15-17 per cent for private banks compared with 13-14 per cent for public sector banks.
The report also pointed to tighter liquidity conditions as a consequence of the recovery in credit growth. The system-wide credit-deposit ratio for scheduled commercial banks rose to 83.3 per cent at the end of June 2026, while the average loan-to-deposit ratio of major US dollar bond issuers was close to 90 per cent.