Indian banks are in their best shape in a decade: Motilal Oswal
- IBEF
- August 25, 2026
Indian banks are in their strongest position in a decade, supported by improved asset quality, stronger capital buffers and healthier balance sheets, according to Motilal Oswal Financial Services Ltd. Gross non-performing assets (NPAs) of scheduled commercial banks declined to around 1.8% in March 2026, a multi-decadal low, while net NPAs stood at approximately 0.4%. The improvement reflects sustained balance sheet repair and a reduction in stressed assets across the banking sector. Stronger profitability and adequate capital positions have also improved banks' ability to support credit growth while maintaining prudent lending standards. The assessment is broadly aligned with the Reserve Bank of India's view that the banking system remains resilient and well capitalised.
The improvement in banking sector fundamentals has coincided with a recovery in credit growth. System-wide bank credit growth accelerated to 14.5% year-on-year in FY2025-26, while deposit growth stood at 11.5%. Healthier corporate balance sheets and sustained economic activity are supporting demand for loans and creating favourable conditions for further expansion in credit. The strengthening of bank balance sheets marks a significant turnaround from the stress experienced during the previous decade, when elevated corporate leverage and rising bad loans constrained profitability and credit growth. With NPAs at historically low levels and capital positions remaining comfortable, Indian banks are better positioned to support the broader economic expansion and participate in the improving credit cycle.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.
Partners
