 "Banks 'resilient' but face stiff fund mobilisation competition: RBI report")
The country’s banking system, while remaining “resilient” with bad loans at over a decade low and strong capital buffers, will continue to face intense competition from non-bank sources for resource mobilisation, said the Reserve Bank of India’s (RBI’s) Trend and Progress of Banking in India 2024-25 report.
The report said the Indian economy recorded robust growth amid a rapidly changing global environment. The near-term outlook remains positive, with inflation easing 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,” said the central bank.
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 the first half of 2025-26, RoA and RoE stood at 1.3 per cent and 12.5 per cent, respectively.
“Going forward, banks will continue to face competition from non-bank sources in meeting the resource requirements of the commercial sector,” the RBI said. Commercial banks are facing increasing challenges in mobilising resources as credit growth continues to outpace deposit growth, pushing the credit-deposit ratio beyond 80 per cent.
The report cautioned that rapid technology change and digitisation could alter the way customers transact with banks for savings and credit, while also exposing the system to newer risks, including cyber risk.
Calling for stronger risk assessment frameworks, the banking regulator said improving operational efficiency through responsible adoption of technology remains essential, alongside continued emphasis on financial inclusion, consumer education and consumer protection. “Robust corporate governance with strong risk management practices remains critical for banks’ long-term success,” it said.
Overall gross non-performing asset levels of SCBs fell to their lowest in several years, with retail loans recording the lowest GNPA ratio. Within the retail segment, however, consumer durables had the highest GNPA ratio, followed by credit card receivables and education loans. “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,” the report said.
The share of unsecured loans in SCBs’ gross advances fell for a second year in a row to 24.5 per cent at end-March 2025, reflecting the RBI’s risk containment measures announced in November 2023.