Private Banks Adopt Conservative Approach Amid Regional Economic Turmoil in Western Asia

Private Banks in India Cautious About Fallout from West Asia War

India's largest private banks, HDFC Bank, ICICI Bank, and Kotak Mahindra Bank, are taking a cautious stance regarding the potential impact of the war in West Asia on their asset quality. Despite stronger asset quality and healthier balance sheets in Q4 FY26, these banks have refrained from providing concrete guidance for FY27, instead choosing to "monitor the situation closely" due to persisting uncertainty.

The banks' management teams have expressed confidence in their portfolios, with HDFC CEO Sashidhar Jagadishan stating that the impact from the war is likely to be short-lived. Kotak Mahindra Bank's Managing Director and Chief Executive Officer, Ashok Vaswani, has also increased oversight on the bank's portfolios to check for anomalies emanating from the West Asia war, but did not comment on any provisions created to weather the conflict.

Comparison of Private Banks' Asset Quality

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Note: GNPA ratio (Gross Non-Performing Asset ratio) is the percentage of total loans that are non-performing.

In contrast, Axis Bank and Federal Bank have announced extra provisions to prevent any credit-related risks from the West Asia war. Axis Bank made a one-time provision of Rs 2,001 crore during the March quarter, while Federal Bank created a floating provision of Rs 456 crore in Q4 FY26.

Some public sector banks, such as Indian Overseas Bank (IOB), Indian Bank, and Union Bank of India (UBI), have also announced credit-related provisions. UBI has set aside Rs 700 crore, while IOB and Indian Bank have set aside Rs 308 crore and Rs 400 crore, respectively.

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PSU Banks' Earnings Commentary Awaited

Earnings commentary from some of the top PSU banks, such as State Bank of India (SBI), Bank of Baroda (BoB), and Punjab National Bank (PNB), are awaited in the coming days for any likely announcement for such provisions.

Benign asset quality among private lenders has been a key factor in their management teams' cautious stance. HDFC Bank, the country's largest private lender, reported a gross non-performing asset ratio (NPA) of 1.15 percent for Q4 FY26, a 20 basis point improvement from the previous corresponding quarter. ICICI Bank, Axis Bank, and Kotak Mahindra Bank also reported GNPA ratios between 1.2 percent and 1.4 percent for the March quarter.