Reference:

• The Reserve Bank of India (RBI) released the “Trends and Progress of Banking in India” Report for the year 2024–25.

Key Highlights:

• The report is statutory in nature, prepared under Section 36(2) of the Banking Regulation Act, 1949.
• It analyses the performance of the banking sector during:

• • Financial Year 2024–25 (April 2024 to March 2025), and
  • First half of FY 2025–26.
• The report emphasizes the strength, resilience, and emerging challenges of India’s banking sector.
• Overall, it highlights:

• • Lowest NPA levels in decades,
  • Strong profitability, and
  • Progress in digital financial inclusion,

while also warning about fraud risks associated with rapid digitalisation.

• The report underlines the continued robustness of the banking sector, driven by:

• • Strong balance sheets,
  • Improved asset quality, and
  • Sustained profitability.

Balance Sheet Growth and Stability:

• The consolidated balance sheet of Scheduled Commercial Banks (SCBs) grew by 11.2% in 2024–25 (down from 15.5% in the previous year), reaching ₹312.2 lakh crore.
• Deposit growth: 11.1% (double-digit, but slower than last year).
• Credit growth: 11.5%.

Analysis:

• Despite global uncertainties, double-digit growth reflects the resilience of the banking sector.
• Balanced growth in deposits and credit indicates increasing public trust in formal banking, even with alternative investment options like equity markets.

Improvement in Asset Quality (Historic Decline in NPAs):

• Gross NPA ratio declined to:

• • 2.2% by March 2025, and
  • 2.1% by September 2025,

marking the lowest level in multiple decades.

Analysis:

• Continuous improvement reflects:

• • Banking sector reforms,
  • Better recovery mechanisms, and
  • Stricter RBI supervision.
• This has reduced risk and enhanced capital availability for banks.

Profitability:

• Return on Assets (RoA):

• • 1.4% in FY 2024–25
  • 1.3% in the first half of FY 2025–26

• Return on Equity (RoE):

• • 13.5% in FY 2024–25
  • Declined to 12.5% subsequently

Analysis:

• This marks the seventh consecutive year of profit growth.
• However, rising funding and operational costs have moderated the pace.
• Strong profitability enhances earnings capacity and capital buffers.

Capital Adequacy:

• Banks maintained adequate capital buffers to absorb risks.
• Capital to Risk-Weighted Assets Ratio (CRAR) stood at 17.4% in March 2025, well above the regulatory requirement of 11.5%.

Major Concerns and Challenges (Flagged Risks):

1. Bank Frauds:

• Number of fraud cases declined from 36,052 to 23,879.
• However, the amount involved increased sharply from ₹11,261 crore to ₹34,771 crore.

2. Digital Risks:

• With rapid digitalisation, banks have been advised to remain vigilant against:

• • Cyber risks, and
  • Technology-related failures.

3. Customer Complaints:

• An increase was observed in complaints related to:

• • Loans,
  • Credit cards, and
  • Digital banking services.

NBFCs and Other Financial Institutions:

• NBFC balance sheet growth: 18.9%, reaching ₹61.09 lakh crore.
• Continued double-digit credit growth with improved asset quality.
• Microfinance segment showed signs of stress, with an increase in GNPA.
• Urban Cooperative Banks recorded higher growth compared to the previous year.

Analysis:

• NBFCs continue to complement the banking sector.
• However, recovery challenges in microfinance remain a concern.