Bad loans at a multi-decadal low of 2.2%, strong capital buffers, a sustained profitability and a healthy balance sheet marked the resilience of India’s banks in FY25, according to a report by the Reserve Bank of India (RBI).

Though with moderation, bank credit and deposit growth continued in double-digits. The health of the banks was also reflected in rise in net profits during 2024-25, although it was at a slower pace compared to the previous year.

"Strong banking sector fundamentals provide a buffer against risks, which, together with prudent regulation, create conditions for sustained credit flow," the RBI report on trend and progress of banking in India 2024-25 said.

Combined net profit of all scheduled commercial banks (SCBs) rose 14.8% year-on-year to Rs 4.01 lakh crore during 2024-25. In 2023-24, their profit had increased by 32.8% to about Rs 3.5 lakh crore.

The report noted that profitability of the SCBs remained robust with the return on assets (RoA) at 1.4% and return on equity (RoE) at 13.5% in 2024-25.

During the first half of FY26, RoA and RoE of the SCBs stood at 1.3% and 12.5%, respectively.

The capital-to-risk-weighted assets ratio of SCBs was 17.4% at March-end 2025 and 17.2% at the end of September 2025, the report said.

"Asset quality strengthened further, with the gross non-performing assets (GNPA) ratio declining to a multi-decadal low of 2.2% at end-March 2025 and 2.1% at end-September 2025," it pointed out.

“Going forward, banks will continue to face competition from non-bank sources in meeting the resource requirements of the commercial sector,” it added.

With credit growth outpacing deposit growth, commercial banks are facing challenges in mobilising resources.

The RBI report also noted that the consolidated balance sheet of urban co-operative banks recorded higher growth in 2024-25 than the previous year.

Their asset quality improved for the fourth consecutive year, alongside the strengthening of their capital buffers and profitability.

According to the report, the non-banking financial companies (NBFCs) continued to record double-digit credit growth along with robust capital buffers. Their asset quality also improved during the year.

The report presents the performance of the banking sector, including commercial banks, co-operative banks and non-banking financial institutions, during 2024-25 and 2025-26 so far.