The Reserve Bank of India (RBI) has released its annual publication, the Report on Trend and Progress of Banking in India 2024-25, under Section 36(2) of the Banking Regulation Act, 1949. This flagship report provides an extensive overview of the performance and resilience of India’s banking and financial system—covering scheduled commercial banks (SCBs), co-operative banks, and non-banking financial institutions (NBFIs)—through the fiscal year 2024-25 and the first half of 2025-26.
The report reaffirms the sector’s solid financial health, reflected in robust credit growth, improved asset quality, and sustained profitability despite evolving macroeconomic and regulatory challenges.
Key Highlights from the Report
- Resilient commercial banking performance: The Indian commercial banking sector maintained its resilience through double-digit balance sheet expansion, supported by healthy growth in deposits and credit. Although growth momentum moderated slightly compared to the previous year, overall banking activity remained strong across market segments.
- Capital adequacy: Scheduled commercial banks (SCBs) reported a capital-to-risk weighted assets ratio (CRAR) of 17.4% at end-March 2025 and 17.2% at end-September 2025, comfortably above the regulatory minimum, underscoring the system’s capital strength.
- Enhanced asset quality: India’s banking system recorded a new milestone, with the gross non-performing assets (GNPA) ratio declining to 2.2% at end-March 2025 and 2.1% at end-September 2025—the lowest in several decades. This decline reflects effective credit risk management, improved recoveries, and prudent lending practices.
- Sustained profitability: The sector’s profitability remained healthy, with return on assets (RoA) at 1.4% and return on equity (RoE) at 13.5% in 2024-25. During the first half of 2025-26, these stood at 1.3% and 12.5%, respectively, demonstrating operational efficiency and strong earnings despite margin pressures.
- Urban co-operative banks: Urban co-operative banks (UCBs) registered higher balance sheet growth relative to the previous year, with continued improvement in asset quality and strengthening of capital and profitability for the fourth consecutive year.
- Non-banking financial companies: NBFCs continued to post double-digit credit expansion, supported by robust demand from retail and MSME segments, while maintaining healthy capital buffers and improved asset quality.
Analytical Overview
Credit Growth Trends
Credit growth in India’s banking system sustained double-digit momentum during 2024-25, driven primarily by expanding retail and services sector lending. While growth moderated slightly compared with 2023-24, the underlying trend suggests stable demand and effective credit distribution. The resilience of credit expansion amid tighter global conditions points to a well-calibrated monetary and liquidity environment maintained by the RBI.
Profitability Dynamics
Profitability indicators—RoA and RoE—reflect sustained operational efficiency and prudent cost management. Higher interest income, contained credit costs, and improved asset quality collectively supported profit growth. Although a marginal dip in RoA and RoE during the first half of 2025-26 indicates a normalization in earnings, the sector remains well-positioned to absorb shocks and sustain profitability at healthy levels.
Asset Quality Improvement
The continued fall in GNPA ratios marks a structural improvement rather than a short-term cycle. Strengthened credit appraisal mechanisms, digital monitoring of loan portfolios, and targeted recovery measures have significantly improved the asset quality outlook. The multi-decadal low GNPA ratio underscores the success of policy measures, including prompt corrective action (PCA) frameworks and system-wide risk management reforms.
The Road Ahead
The Trend and Progress Report 2024-25 emphasizes that India’s banking sector has entered a phase of sustainable balance between growth and stability. With strong capital adequacy, lower NPAs, and diversified credit portfolios, the system is better prepared to support the economy’s ongoing expansion while managing emerging risks related to interest rate transitions and global financial volatility.
Policy Implications and Outlook for FY 2026-27
Looking ahead to FY 2026-27, the RBI’s policy focus is expected to remain on maintaining financial stability while supporting inclusive credit expansion. The combination of robust capital positions and improved asset quality offers room for calibrated credit growth, particularly in MSME, infrastructure, and green finance segments. As macroeconomic conditions evolve, policy measures are likely to encourage digital-driven efficiency, climate risk management, and enhanced governance standards across the financial ecosystem. Sustained reforms in supervisory architecture and data-driven monitoring will continue to reinforce the structural soundness of India’s banking system in the coming year.
