RBI said banks remain resilient with low bad loans and strong capital, but credit growth outpacing deposits will keep resource mobilisation competitive, requiring strong governance and risk management
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Reserve Bank of India, RBI. (File Photo)
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While the Indian banking sector continued to be resilient, with bad loans at a decadal low and robust capital levels, banks will continue to face competition for resource mobilisation from non-bank sources, the Reserve Bank of India’s Trend and Progress Report of Banking in India 2024-25 said.
How does the RBI assess the economy and banking sector performance?
The report said the Indian economy recorded robust growth amid a rapidly changing global landscape, with the near-term outlook remaining positive, while inflation softened to a multi-year low.
“The Indian banking sector remained resilient, underpinned by a strong balance sheet, sustained profitability, steadily improving asset quality, and high capital buffers,” it said.
What does the RBI data show on bank profitability in 2024-25 and H1FY26?
Profitability of scheduled commercial banks (SCBs) remained robust, with return on assets (RoA) at 1.4 per cent and return on equity (RoE) at 13.5 per cent in 2024-25. During H1: 2025-26, RoA and RoE of SCBs stood at 1.3 per cent and 12.5 per cent, respectively, the report said.
Why will resource mobilisation remain challenging for banks?
“Going forward, banks will continue to face competition from non-bank sources in meeting the resource requirements of the commercial sector,” it said. Commercial banks in India are facing challenges in mobilising resources, with credit growth surpassing deposit growth, resulting in a credit-deposit ratio of over 80 per cent.
What risks does RBI flag from technology and digitalisation?
The report also cautioned that rapidly changing technology and digitalisation could change the way people transact with banks for their savings and credit needs, while also exposing the banking system to newer risks, including cyber risk.
What does the RBI advise banks to do next?
Asking banks to strengthen risk assessment, the RBI said improving operational efficiency through responsible technology adoption remains essential, with continued emphasis on financial inclusion, consumer education and protection.
“Robust corporate governance with strong risk management practices remains critical for banks’ long-term success,” it said.
Which retail loan segments show stress, despite low overall NPAs?
While overall gross non-performing asset (GNPA) levels of SCBs are the lowest in several years, and lowest in retail loans, the GNPA ratio of consumer durables was the highest in the retail segment, followed by credit card receivables and education loans, the report observed.
“Asset quality of education loans and housing loans improved, while it weakened for consumer durables, credit card receivables and vehicle loans at end-March 2025,” it said.
What is the trend in unsecured lending, and which banks have the highest share?
The report further noted that the share of unsecured loans in SCBs’ gross advances declined for the second consecutive year to 24.5 per cent at end-March 2025, mainly reflecting RBI’s risk containment measures announced in November 2023.
Foreign banks continued to have the highest share of unsecured advances, while the share of public and private sector banks has gradually converged in recent years.
What does RBI say about NBFCs and microfinance?
On non-banking financial companies (NBFCs), the RBI said these entities recorded robust performance, supported by double-digit credit growth, improved asset quality and comfortable capital buffers. NBFCs accounted for around a quarter of the credit extended by SCBs, underscoring the growing importance of NBFCs in meeting the credit requirements of the economy.
At the same time, the report called for close monitoring of the microfinance sector, which saw a deterioration in asset quality.
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