India's banks turn healthier as bad loans hit multi-decade low
What's the story
The Reserve Bank of India (RBI) has reported a major improvement in the asset quality of Indian banks. By September 2025, the gross non-performing assets (GNPA) ratio had fallen to 2.1%, from 2.2% in March 2025. This is the lowest level since RBI began tracking it in the late '90s, as per the central bank's Trend and Progress of Banking report. The decline indicates that banks are managing risky loans better and maintaining their financial health effectively.
Sectoral progress
Public sector banks lead the way in reducing bad loans
Public sector banks have made significant strides in reducing their bad loan ratios. From over 9% in 2021, they brought it down to just 2.6% by March 2025. This remarkable turnaround shows that the efforts of the government and RBI to clean up bank books are finally paying off. The positive trend isn't limited to public sector banks alone; non-banking finance companies (NBFCs) also reported improved asset quality amid double-digit loan growth during FY24-25.
Sectoral performance
Banking sector shows resilience amid slower growth
Despite a slight slowdown in growth this year, both deposits and lending witnessed double-digit increases. This indicates that people are still saving and borrowing with confidence. The RBI report also noted that banks' deposits and credit grew in double-digit percentages during FY24-25, albeit at a moderated pace compared to the previous year.