Indian Banks at Strongest Financial Health in a Decade

Indian scheduled commercial banks have reached their strongest financial health in over a decade, underscored by multi-decadal low non-performing assets (NPAs) and robust balance sheet repair, according to Motilal Oswal Financial Services. Gross NPAs dropped to approximately 1.8% in March 2026 while net NPAs fell to 0.4%, reflecting a substantial reduction in stressed corporate assets and bad loans. Backed by solid profitability, comfortable capital buffers, and prudent risk management, the banking sector aligns with the Reserve Bank of India’s assessment of systemic resilience and capital adequacy. This structural cleanup has coincided with a sharp rebound in credit demand, with system-wide bank credit growing 14.5% year-on-year in FY2025-26 alongside an 11.5% rise in deposits. Supported by healthier balance sheets in corporate India and steady macroeconomic activity, banks have effectively moved past the prior decade's elevated leverage and bad loan crises. Positioned with robust capital reserves and historically low impaired assets, Indian lenders are now well-equipped to sustain accelerating loan expansion and drive broader economic development.