India's banking sector demonstrated strong resilience and improved health in fiscal year 2024-25, with the gross non-performing assets (GNPA) ratio for scheduled commercial banks declining to a multi-decadal low of 2.2% as of end-March 2025, according to the Reserve Bank of India's (RBI) latest "Report on Trend and Progress of Banking in India." This figure further improved to 2.1% by end-September 2025, reflecting effective recovery efforts, lower slippages, and sustained provisioning. The report, released on December 29, 2025, highlighted robust profitability, with combined net profits for scheduled commercial banks rising significantly—aligning with the headline 15% increase noted in coverage—supported by strong balance sheets and disciplined lending practices.

Profitability metrics remained impressive, with return on assets (RoA) at 1.4% and return on equity (RoE) at 13.5% for FY 2024-25, while these stood at 1.3% and 12.5%, respectively, in the first half of FY 2025-26. Capital adequacy stayed well above regulatory requirements, with the capital-to-risk-weighted assets ratio (CRAR) at 17.4% in March 2025 and 17.2% in September 2025. These indicators underscore the sector's ability to absorb potential shocks, bolstered by double-digit growth in deposits and credit, albeit moderated from prior years. The improvements in asset quality extended across commercial banks, with particular gains in retail and corporate segments through better risk management and resolution mechanisms.

The positive trends were not limited to scheduled commercial banks, as urban cooperative banks recorded higher balance sheet growth, improved asset quality for the fourth consecutive year, and strengthened capital buffers. Non-banking financial companies (NBFCs) also exhibited double-digit credit expansion, robust profitability, and enhanced asset quality. The RBI emphasized that the overall banking system's resilience stems from these factors, enabling continued credit flow to productive sectors and underserved populations while maintaining liquidity and leverage ratios above minimum norms.

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This performance marks a continued recovery from past challenges, with GNPA levels now at historic lows compared to peaks seen in previous decades. As the sector enters 2026, the report's findings suggest a stable outlook amid ongoing economic growth, though vigilance remains key in areas like certain retail segments showing strains. The RBI's assessment reinforces confidence in the Indian financial system's strength, positioning it well to support broader economic objectives in the coming period.

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