RBI Reports Strong Growth, Record-Low Bad Loans in India’s Banking Sector
India’s banking sector remains resilient, supported by strong balance sheet expansion and a continued decline in bad loans, according to the Reserve Bank of India’s Trend and Progress of Banking report released on Monday. The report noted that banks’ gross non-performing assets (GNPA) ratio fell to 2.1% at the end of September 2025 from 2.2% in March 2025 — a multi-decade low. Asset quality improved across key retail segments such as housing, education, and credit cards, although stress persists in select areas, with consumer durables recording the highest bad-loan ratio within retail lending and the leather and leather products sector leading delinquencies in industrial loans.
The RBI highlighted that banks moderated growth in consumption-oriented lending — including personal loans, credit cards, consumer durables, and vehicle finance — over the past two years, following regulatory tightening in response to rising small-ticket personal loan risks in late 2023, some of which has since been partially rolled back. Meanwhile, non-bank finance companies (NBFCs) saw further improvement in asset quality through 2024–25, supported by sustained double-digit balance sheet growth. Despite moderation in overall profit growth due to narrowing interest margins, banks continued to post double-digit growth in deposits and credit during the financial year.
The report reaffirmed that Indian lenders remain well-capitalised, with leverage and liquidity ratios comfortably above regulatory thresholds, providing a strong buffer to support ongoing credit expansion. The central bank also emphasised emerging climate-related financial risks, noting efforts to build a dedicated information system to track climate exposures and develop a sector-wide climate risk disclosure framework. Climate finance, the RBI said, is a shared responsibility requiring coordination among regulators, financial institutions, governments, and global partners.
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