Core Insights - The retail loan books of both private and public sector banks have seen significant growth post-pandemic, but this has led to increased risks and bad loans due to sharp practices by some lenders [1] Retail Loan Performance - Major lenders like SBI, HDFC Bank, and ICICI Bank have managed to keep their gross non-performing assets (GNPA) stable between April and December 2025, while many private sector banks, particularly Axis Bank, have seen a rise in bad loans [2] - SBI reported the highest retail GNPA at ₹11,168 crore as of December 31, 2025, which was nearly unchanged from ₹11,109 crore in March 2025. HDFC Bank and ICICI Bank recorded declines of 8% and 11% respectively in their retail GNPA [3] Regulatory Environment and Market Dynamics - The RBI's regulatory tightening and a revival in credit demand have prompted larger banks to exercise more caution in retail lending, while rising interest rates have dampened demand in this segment [4] Private vs Public Sector Banks - Private sector banks have reported higher growth in retail GNPAs, with Axis Bank experiencing a 23% increase to ₹7,381 crore, followed by IDBI Bank with a 21.64% rise. Other private lenders like Bandhan Bank, IDFC First, and IndusInd Bank also recorded significant increases [5] - In contrast, public sector banks have shown the highest declines in retail GNPAs, with Indian Bank reporting a 39% drop to ₹958 crore and Canara Bank a 37% drop to ₹1,451 crore [6] Structural Differences - Public sector banks are structurally less exposed to retail risk, as they are not major players in the retail market, leading to better quality of retail assets compared to private sector banks, which often pursue volume for growth [7] Risk Appetite and Future Outlook - The divergence in performance among banks reflects differences in risk appetite, with customer acquisition strategies closely aligned to the risk profiles of financial institutions. Experts suggest that while retail credit growth may be nearing its peak, GNPA levels could rise for a few more quarters before stabilizing, emphasizing the need for disciplined lending [8]