Furthermore, rapidly changing technology and digitalization may change the way people interact with banks for their savings and credit needs, while also exposing the banking system to newer risks, including cyber risks.
“Strengthening risk assessment and improving operational efficiencies through responsible technology adoption remain essential, with continued emphasis on financial inclusion, consumer education and protection. Robust corporate governance with strong risk management practices remains critical to banks’ long-term success,” said the report for the year ending March 31, 2025.
The central bank warned that the performance of microfinance loans will need to be closely monitored going forward.
“NBFCs must continue their diversification of funding sources and balance their growth ambitions with sound and fair practices to ensure inclusive growth and financial stability. They must be vigilant about emerging technological and cyber challenges, besides promptly addressing customer complaints,” the report said.
Of the total flow of financial resources to the commercial sector in India, which stood at Rs 35.1 lakh crore in FY25, banking and non-banking flows stood at Rs 18 lakh crore and Rs 17.1 lakh crore, respectively.
The increase in financing from non-bank sources over 2024-2025 was largely driven by buoyant domestic capital markets, which was reflected in higher equity issuances and increased corporate bond placements amid easing market conditions, increased credit flow from NBFCs and a recovery in short-term external credit.
The RBI noted that banks and NBFCs remain resilient, supported by strong capital buffers, improved asset quality and robust earnings, ensuring the flow of credit to productive sectors and underserved population groups.
During FY25, the balance sheet of scheduled commercial banks (SCBs) (excluding regional rural banks) grew at a healthy pace (11.2 percent versus 15.5 percent in FY24).
Balance sheet growth was driven by double-digit growth in deposits (11.1 percent) and lending (11.5 percent), albeit with some moderation. Profitability remained strong, as evidenced by an increase in return on assets.
NPAs at their lowest point in decades
Asset quality has further improved, with the gross non-performing assets (GNPA) ratio falling to a ten-year low (2.2 per cent versus 2.7 per cent in FY24) and the slippage ratio falling for the fifth consecutive year to 1.4 per cent at end-March 2025.
According to supervisory data, the GNPA and Net NPA ratios of SCBs stood at 2.1 percent and 0.5 percent, respectively, at the end of September 2025.
RBI emphasized that banks remain well capitalized and their leverage and liquidity ratios are well above the statutory minimum. These strong fundamentals provide a buffer against risks and underpin the banking sector’s ability to support credit expansion.
The capital to risk-weighted assets (CRAR) ratio of the SCBs stood at 17.2 percent at the end of September 2025, compared to 17.4 percent at the end of March 2025.
In India, the minimum statutory capital to risk-weighted asset ratio (CRAR) requirement for banks has been set at 9.0 percent [11.5 per cent inclusive of capital conservation buffer (CCB)] and the Tier 1 capital ratio requirement of 7.0 percent, both one percentage point above Basel III standards.
Increasing importance of NBFCs
The central bank underlined that NBFCs accounted for about a quarter of the credit extended by SCBs at the end of March 2025, underscoring the growing importance of NBFCs in meeting the credit needs of the economy.
NBFCs recorded an improvement in asset quality and remained well capitalized. Their GNPA ratio fell from 3.5 percent at the end of March 2024 to 2.9 percent at the end of March 2025.
These entities remained well capitalized, with a CRAR of 25.9 percent at the end of March 2025, well above the regulatory requirement of 15 percent. NBFC-MFIs (microfinance institutions) have further increased their CRAR during 2024-2025 as a precautionary measure. At the end of September 2025, the CRAR of the NBFC sector stood at 24.9 percent.
Credit extended by NBFCs has increased over the years, underscoring their growing importance in financial intermediation, RBI said. It rose from 13.5 percent a year ago to 14.6 percent of gross domestic product at the end of March 2025.
NBFCs’ credit as a percentage of outstanding credit of scheduled commercial banks (SCBs) rose to 25.3 percent at end-March 2025 from 23.6 percent a year ago
At the end of September 2025, NBFCs’ loans and advances rose 20.5 percent year-on-year to Rs 52,05,544 crore,
Published on December 29, 2025
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