Strengthening Foundations India’s Banking Sector Transformation
Context
India’s banking system has evolved through sustained reforms and consolidation, emerging as a resilient, profitable and well-capitalised backbone of economic growth.
Current Health of India’s Banking System
Balance Sheet Expansion
Deposits increased from Rs.88.35 lakh crore in 2015 to Rs.231.90 lakh crore in 2025
Credit expanded from Rs.66.91 lakh crore to Rs.181.34 lakh crore
Capital and Asset Quality
CRAR improved from 12.94 percent to 17.36 percent
CET 1 capital rose from 9.98 percent to 14.81 percent
GNPA declined to 2.2 percent and NNPA to 0.5 percent in March 2025
Stressed assets in SCBs reduced from 9.8 percent in 2014 to 3.55 percent in 2025
Profitability Trends
Bank profitability improved for the sixth consecutive year in 2023–24
SCBs recorded a record net profit of Rs.4.01 lakh crore in FY 2024–25
Return on Assets at 1.37 percent and Return on Equity at 14.1 percent
Reforms and Policy Measures Driving Performance
Cleaning Balance Sheets
Asset Quality Review 2015 ensured transparent recognition of NPAs
4R strategy focused on recognition, resolution, recapitalisation and reforms
Resolution and Recovery Framework
Insolvency and Bankruptcy Code 2016 enabled time-bound resolution
Strengthening of SARFAESI and debt recovery laws and DRT jurisdiction raised to Rs.20 lakh
Regulatory Strengthening
Prompt Corrective Action framework and PSB consolidation into 12 banks by 2020
RBI Prudential Framework for early stress resolution
Proposed Expected Credit Loss framework 2025 for risk-sensitive provisioning
Evolving Priorities and the Way Forward
Growth-Oriented Credit Expansion
Strengthening deposit mobilisation to sustain credit growth
Deepening lending to infrastructure, green energy and emerging sectors
Financing Small Modular Nuclear Reactors announced in Budget 2025–26
Inclusion and Global Integration
Expansion of credit under PM MUDRA Yojana, PM Vishwakarma, PM Surya Ghar Muft Bijli Yojana, PM Vidyalaxmi and Kisan Credit Card
Strengthening international operations through GIFT City and participation in India International Bullion Exchange
Conclusion
India’s banking sector has transitioned from stress to strength, supported by structural reforms, robust capital buffers and rising profitability. Sustained regulatory vigilance and inclusive credit expansion will keep banks at the centre of India’s long-term growth journey.
Source : PIB