Synopsis: HDFC Bank, ICICI Bank, and the other three largest private banks have reported their Q2 results. Which bank delivered the best in terms of asset quality?
Asset quality ranks among the key measures that reveal the financial condition of a bank. It essentially demonstrates the security of the bank’s loans and the repayment capacity of the borrowers. A decline in asset quality means banks will have to face problems with increasing NPAs, elevated provisioning expenses, and a decrease in profitability.
One of the best examples was the Yes Bank crisis, when the increase in bad loans led to loss of investor confidence and regulatory intervention. Hence, healthy asset quality not only acts as a cushion for profits but also guarantees the bank’s viability and trust over time.
In this article, we will dive into the asset quality of the top five banks included in the Nifty Private Bank index. These five banks account for approximately 85 percent of the total weight in the index.
HDFC Bank
HDFC Bank Ltd is India’s largest private-sector bank, with a market capitalisation of Rs 15 lakh crore. It offers retail, corporate, and digital banking services and is known for its strong asset quality and consistent earnings growth. HDFC Bank has a weightage of 21.02 percent in the Nifty Private Bank index.
HDFC Bank reported a GNPA of 1.2 percent in Q2 FY26, which declined by 20 bps from 1.4 percent in Q2 FY25. Also, it reported an NNPA of 0.4 percent in Q2 FY26, which largely remained flat during the same period.
ICICI Bank
ICICI Bank Ltd is the second-largest private sector bank in India, valued at about Rs 10 lakh crore. It has a strong retail and corporate presence and is a leader in digital and consumer lending solutions. ICICI Bank has a weightage of 19.77 percent in the Nifty Private Bank index.
ICICI Bank reported a GNPA of 1.58 percent in Q2 FY26, which declined by 39 bps from 1.97 percent in Q2 FY25. Additionally, it reported an NNPA of 0.39 percent in Q2 FY26, which also declined slightly by 3 bps from 0.42 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 75 percent, as against 78.5 percent in the same quarter of the previous year.
Kotak Mahindra Bank
India’s third-largest private bank, with a market cap of roughly Rs 4.2 lakh crore. Known for its conservative approach, it focuses on high-quality assets, digital innovation, and wealth management. Kotak Mahindra Bank has a weightage of 19.60 percent in the Nifty Private Bank index.
Kotak Mahindra Bank reported a GNPA of 1.39 percent in Q2 FY26, which declined by 10 bps from 1.49 percent in Q2 FY25. Additionally, it reported an NNPA of 0.32 percent in Q2 FY26, which also dropped by 11 bps from 0.43 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 77 percent, as against 71 percent in the same quarter of the previous year.
Axis Bank
Among the top four private sector banks, Axis Bank has a market cap of around Rs 3.8 lakh crore. It serves retail, SME, and corporate clients and continues to expand its digital reach. Axis Bank has a weightage of 19.83 percent in the Nifty Private Bank index.
Axis Bank reported a GNPA of 1.46 percent in Q2 FY26, which declined slightly by 2 bps from 1.44 percent in Q2 FY25. However, it reported an NNPA of 0.44 percent in Q2 FY26, which grew by 10 bps from 0.34 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 70 percent, as against 77 percent in the same quarter of the previous year.
Federal bank
Federal Bank is a mid-sized private bank valued at nearly Rs 60,000 crore. Based in Kerala, it has a strong NRI and retail banking base and is rapidly growing its digital and national footprint. Federal Bank has a weightage of 4.74 percent in the Nifty Private Bank index.
Federal Bank reported a GNPA of 1.83 percent in Q2 FY26, which declined by 26 bps from 2.09 percent in Q2 FY25. Additionally, it reported an NNPA of 0.48 percent in Q2 FY26, which declined by 9 bps from 0.57 percent in Q2 FY25. It has a Provision Coverage Ratio (PCR) of 73.45 percent, as against 71.82 percent in the same quarter of the previous year.
Among the top private banks, HDFC Bank delivered the best asset quality in Q2 FY26, with the lowest Gross NPA at 1.2 percent and Net NPA at 0.4 percent, reflecting its strong risk management and stable lending book.
ICICI Bank and Kotak Mahindra Bank also showed healthy improvement, while Axis Bank and Federal Bank trailed slightly with relatively higher NPA levels. Overall, HDFC Bank remains the clear leader in asset quality.
Written by Satyajeet Mukherjee
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