Indian banking sector resilient: RBI

As the calender year comes to a close, India’s banking system remains strong and continues to support economic growth and financial inclusion, according to the Reserve Bank of India’s latest Trend and Progress of Banking report released on Monday. The sector is backed by solid balance sheets, stable profits and steadily improving asset quality.The RBI said banks’ gross non-performing assets (GNPA) ratio — which measures bad loans as a share of total lending — declined to 2.1% at the end of September 2025, improving from 2.2% in March 2025. This is the lowest level recorded in several decades and reflects the success of ongoing efforts to clean up bank balance sheets.Banks also maintained strong capital positions, giving them the capacity to handle risks while continuing to lend. During 2024-25, both deposits and credit grew in double digits, although the pace was slightly slower than the previous year.Regulators are continuing to strengthen the sector by aligning regulations and macro-prudential policies to improve stability and competitiveness, while also promoting ease of doing business. The Sanjay Malhotra-led central bank added that balancing innovation with stability through careful supervision will be essential to keep the financial system resilient."The Indian financial sector is undergoing a transformative phase, shaped by evolving market dynamics, technological innovations, and increasing sophistication of consumers and businesses. The Reserve Bank’s policy measures are aimed at strengthening the resilience and competitiveness of banks, enhancing credit flow, improving ease of doing business, promoting consumer protection, and further internationalising the Indian Rupee," the report noted.Meanwhile, non-banking financial companies (NBFCs) also performed well during the year. The central bank noted that NBFCs recorded double-digit loan growth, better asset quality and comfortable capital buffers, further strengthening the overall financial system."The Indian banking sector remained resilient, underpinned by a strong balance sheet, sustained profitability, steadily improving asset quality, and high capital buffers. Non-banking financial companies (NBFCs) also recorded robust performance, supported by double-digit credit growth, improved asset quality and comfortable capital buffers," read the report.Overall, the RBI said India’s financial system remains in a strong position, well placed to support the country’s economic expansion in the period ahead.Focus on climate risk The central bank further noted rising risks from climate change to financial stability. It said it is developing an information system to identify climate-related financial risks and is working towards a climate risk disclosure framework. “Climate finance is both a national imperative and a collective responsibility and it requires coordination across regulators, institutions, governments and global actors,” the report said.Overall, the RBI said India’s financial system is in a strong position and remains well equipped to support the country’s economic expansion in the period ahead.