Bank profits rise for 7th year, bad loans fall to multi-year low

MUMBAI: RBI has said that the banking sector remains resilient, backed by double-digit balance sheet growth and sustained profitability. Asset quality improved further, with the gross non-performing assets ratio falling to a multi-decadal low and the slippage ratio declining for the fifth straight year.

While commercial banks reported profit growth for the seventh consecutive year, the pace moderated compared with last year amid rising funding and operating costs.

The report titled, 'Report On Trend and Progress of Banking in India' released by RBI on Monday, shows that the banking system's balance sheet expanded 11.2% in 2024-25 to Rs 312.2 lakh crore, with deposits and loans growing almost in tandem at 11.1% and 11.5%, respectively. "The Indian banking sector remained resilient, underpinned by a strong balance sheet, sustained profitability, steadily improving asset quality, and high capital buffers," the report said.

Borrowings rose at a slower 7%, indicating that credit expansion continued to be largely funded through core deposits rather than market sources. Investments increased 9.2% during the year.

Profitability remained strong, with net profit rising 14.7% to Rs 4,01,180 crore. Return on assets edged up to 1.4%, while return on equity was largely stable at 13.5%. Net interest margins, however, compressed to 3.1% from 3.3%, reflecting higher deposit costs and pressure on spreads. Asset quality recorded a marked improvement. Gross NPAs declined 10.2% to Rs 4,31,634 crore and net NPAs fell 10.6% to Rs 95,388 crore. The gross NPA ratio improved to 2.2% from 2.7%, while the net NPA ratio declined to 0.5%, underscoring the continued clean-up of bank balance sheets.

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