Banking Progress Report 2024-25: RBI’s Comprehensive Analysis of NPA Decline, Credit Trends & Sector Resilience
The Reserve Bank of India (RBI) released its flagship “Trend and Progress of Banking in India 2024-25” report, showcasing the sector’s robust recovery. Gross NPA ratio plummeted to a multi-decade low of 2.1% (Sep 2025) from 11.2% peak in 2018 (Mar 2018), while credit growth moderated to sustainable levels amid regulatory tightening.
NPA Recovery: India’s 12-Year Banking Turnaround
The Indian banking sector has witnessed a remarkable transformation over the last decade. From the peak crisis of 2018 where Gross Non-Performing Assets (GNPA) touched 11.2%, the sector has achieved a historic recovery.
- Peak GNPA (Mar 2018): 11.2%
- Mar 2025: 2.2% (13-year low)
- Sep 2025: 2.1% (multi-decade low)
Key Metrics (Sep 2025):
| Metric | Value | PSBs | PVBs |
|---|---|---|---|
| GNPA Ratio | 2.1% | 3.7% | 1.7% |
| NNPA Ratio | 0.5% | 1.0% | 0.4% |
| PCR | 77.5% | 72% | 85% |
| CRAR | 17.2% | 15.8% | 18.5% |
Credit Growth Moderation: From Double-Digits to Sustainable Pace
Credit growth has shown signs of moderation, moving from a high-growth phase to a more sustainable trajectory.
- FY24: 15.5% (Peak post-COVID)
- H1 FY25: 12.8% (Healthy expansion)
- H2 FY25: 9.6% (Moderation begins)
- Dec 25: 8.5% (Sustainable trajectory)
Sector Breakdown (FY25):
| Sector | FY25 Growth | Key Trend |
|---|---|---|
| MSME | 14.2% | Outperformed others |
| Retail | 5.7% | Unsecured loans regulated |
| Industry | 7.8% | Capex revival Q4 |
| Services | 9.2% | Moderation from peaks |
Profitability: Banking Sector’s Golden Era Continues
The profitability metrics indicate a robust financial health for Indian banks.
- RoA: 1.4% (FY25) → 1.3% (H1 FY26) [Stable]
- RoE: 13.5% (FY25) → 12.5% (H1 FY26) [Healthy]
- Net Interest Margin: 3.45% → 3.42% [Consistent]
- Net Profit Growth: 21% YoY → 18% [Robust]
PSBs vs Private Banks:
- PSBs: RoA 1.1%, CRAR 15.8% (improved governance)
- Private Banks: RoA 1.7%, CRAR 18.5% (efficiency leaders)
Stress Points: Regulatory Radar
1. Microfinance Sector Alert
- NBFC-MFIs GNPA: Increased from 2.0% to 4.1% (Mar-Sep 25)
- Personal loans: Stress emerging in unsecured segments.
- RBI Action: Higher risk weights and Loan-to-Value (LTV) caps implemented.
2. Unsecured Retail Loans
- Growth cooled significantly from 35%+ to 15% post-RBI norms.
- Personal loans GNPA: 1.8% (currently under watchlist).
3. Corporate Stress
- Large Corporates: In a recovery phase.
- Specific Sectors: Steel and textiles showing need for sector-specific provisions.
12-Year Banking Transformation Story
From Crisis to Credibility:
- Mar 2018: GNPA 11.2% (Capital flight fears)
- Mar 2020: COVID shock (Moratoriums implemented)
- FY23: 5.9% GNPA (IBC peak impact visible)
- FY25: 2.1% GNPA (Global benchmark standards achieved)
Enablers of Transformation:
- Asset Quality Review (AQR) 2015: Forced true NPA recognition.
- Insolvency and Bankruptcy Code (IBC) 2016: Enabled ₹3 lakh crore recoveries.
- Recapitalization: ₹3.2 lakh crore infusion into PSBs.
- PCA Framework: Disciplined weak banks to improve health.
- Digital Banking: Reduced operational costs significantly.
Macroeconomic Implications
Positive Spillovers
✅ Lower provisioning leads to higher lending capacity.
✅ Strong CRAR (17.2%) ensures better shock absorption.
✅ Deposit mobilization improved with term deposit growth.
✅ PSB revival supports broader financial inclusion goals.
Forward Risks
⚠️ Credit-deposit mismatch is narrowing but needs monitoring.
⚠️ Unsecured retail segments face over-leverage risks.
⚠️ The microfinance sector showing bubble concerns.
⚠️ Global rate cycles may impact funding costs.
UPSC & Competitive Exam Relevance
Prelims (Direct Questions)
- Q1. RBI’s Trend & Progress Report 2024-25 highlighted which key achievement?
- A. GNPA ratio at multi-decade low of 2.1%.
- Q2. Which sector led credit growth in FY25?
- A. MSME sector.
GS3 Mains (15 Marks)
“The Indian banking sector has achieved historic asset quality improvement over the last decade. Analyze the factors behind this transformation and assess sustainability in current global economic conditions.”
Structure Answer:
- Introduction: NPA journey 11.2% → 2.1%.
- Factors: AQR, IBC, recapitalization, digital adoption.
- Current status: Credit moderation healthy, profitability high.
- Risks: Microfinance stress, unsecured loans.
- Way forward: Continued vigilance and governance reforms.
Essay Points (Banking Reforms)
- Financial stability vs growth trade-off.
- PSBs vs private banks efficiency debate.
- Digital banking’s dual role (enabler vs risk).
- Regulatory balancing act by RBI.
Sector-wise Credit Deployment (FY25 Snapshot)
- Agriculture: 18.5% Share | 12.5% Growth
- MSME: 26.8% Share | 14.2% Growth
- Housing: 13.2% Share | 9.8% Growth
- Education: 4.1% Share | 11.2% Growth
Global Context & India’s Position
- India GNPA: 2.1% (Sep 25)
- US: 1.2% | China: 1.7% | Emerging Asia: 3.2%
- Conclusion: India outperforms most emerging markets, matching developed economy standards.
Policy Takeaways for RBI
- Maintain vigil on microfinance and personal loans.
- Support MSME credit as the key growth engine.
- Monitor NIM compression arising from deposit competition.
- Digital infrastructure scaling for future readiness.
Conclusion: Banking Sector Enters New Stability Era
RBI’s Trend and Progress Report 2024-25 confirms India’s banking sector has graduated from crisis management to growth stewardship. The 2.1% GNPA marks a 12-year triumph, positioning banks for sustainable credit expansion supporting India’s Viksit Bharat 2047 ambitions.
Exam Mantra: Banking = Asset Quality (NPAs) + Credit Growth + Profitability (RoA/RoE). Master these metrics for exam success!
The Prayas India | Economy Simplified for UPSC/Competitive Exams
