RBI Report Card Says Banks NPAs at Multi Decade Lows

 Mumbai: Banking sector in India remained resilient during 2024-25 and 2025-26 so far supported by strong balance sheets, sustained profitability and improved asset quality with gross non-performing assets (GNPA) ratio to gross advances declining to a multi-decadal low of 2.1 per cent at end-September this year, said the central bank in its report titled Trend ‍and Progress of Banking in India released on Monday.

“The trend of improvement in asset quality of banks observed since 2018-19, measured by their declining GNPA ratios, continued during 2024-25. The GNPA ratio of scheduled commercial banks (SCBs) declined further to a multi-decadal low of 2.2 per cent at end-March 2025 from 2.7 per cent at end March 2024,” said the RBI report card.

During 2024-25, around 42.8 per cent of the reduction in GNPAs was attributable to recoveries and upgradations. The net NPA (NNPA) ratio also declined to 0.5 per cent at end March 2025, partly reflecting higher provisioning. The slippage ratio of SCBs, which measures new accretions to NPAs as a share of standard advances at the beginning of the year, declined for the fifth consecutive year to 1.4 per cent at end-March 2025.

Net Profit of scheduled commercial banks increased during 2024-2025 albeit at a slower pace at 14.8 per cent year on year to Rs 4.01 lakh crore. In 2023-2024 their profits had increased 32.8 per cent to Rs 3.5 lakh crore.

“The Indian banking sector remained resilient, underpinned by a strong balance sheet, sustained profitability, steadily improving asset quality, and high capital buffers. Non-banking financial companies (NBFCs) also recorded robust performance, supported by double-digit credit growth, improved asset quality and comfortable capital buffers," said the report.

Profitability of banks remained robust during the year, with return on assets (RoA) at 1.4 per cent and return on equity (RoE) at 13.5 per cent. Bank credit and deposit growth continued in double-digits, albeit with a moderation. Capital and liquidity buffers remained well above the regulatory requirements across bank groups. Strong banking sector fundamentals provide a buffer against risks, which together with prudent regulation create conditions for sustained credit flow.

Asset quality in retail loan segments such as housing, education and credit cards has improved even though certain segments continue to see strains, the report noted. Within retail loan segments, the bad loan ratio for consumer durables was the highest. Within loans to industry, the leather and leather products segment continued to have the highest bad loan ratio, the RBI said.

Overall, the RBI said India’s financial system is in a strong position and remains well equipped to support the country’s economic expansion in the period ahead.

The central bank further noted rising risks from climate change to financial stability. It said it is developing an information system to identify climate-related financial risks and is working towards a climate risk disclosure framework. “Climate finance is both a national imperative and a collective responsibility and it requires coordination across regulators, institutions, governments and global actors,” the report said.