Page 10 - Banking Finance February 2026

BANK UPDATE

Total small business credit the credit ecosystem, accounting for a regulatory push involving mergers of
around 80 per cent of total credit and unviable entities, closures, and restric-
exposure rises 16% to Rs.
nearly 90 per cent of borrowers. The tions on issuing new licences.
46 lakh crore fastest-growing segment is sole propri- During 2024-25, seven mergers of
Aggregate credit exposure to India's etors with an entity presence, which UCBs were effected, including six in
small business segment rose 16 per expanded 20 per cent year-on-year, Maharashtra and one in Telangana.
cent year-on-year to Rs. 46 lakh crore driven largely by loans against property. With these, the cumulative number of
as of September 30, according to the As of September 2025, 23.3 per cent of mergers since 2004-05 rose to 163,
CRIF High Mark-SIDBI report. The re- borrowers were new to credit and 12 more than half of which involved banks
port highlighted that active loan ac- per cent were new to enterprise bor- in Maharashtra. In addition, licences of
counts increased 11.8 per cent to 7.3 rowing, indicating deeper formalisation. eight non-scheduled UCBs were can-
crore, supported by policy measures Working capital loans formed the bulk celled during the year, covering insti-
and multiple government-backed of enterprise credit, while term loans tutions in Uttar Pradesh, Andhra
credit schemes for micro, small and supported capital expenditure. Pradesh, Bihar, Maharashtra, Assam,
medium enterprises (MSMEs).
and Tamil Nadu.
Portfolio quality showed improvement Number of urban co-op- The RBI noted that in December 2022
across segments, with loans overdue erative banks declines to it introduced a four-tiered regulatory
by 91-180 days declining to 1.4 per
cent in September 2025 from 1.7 per 1,457 in FY25 framework for UCBs, based on the rec-

cent in September 2023. Enterprises The number of urban co-operative ommendations of an expert committee
chaired by N S Vishwanathan. The
displayed lower risk profiles, while sole banks (UCBs) in India declined to 1,457 framework aims to balance the coop-
proprietors also recorded steady im- at the end of March 2025, continuing a
provement, aided by better underwrit- long-term consolidation trend initiated erative character of smaller UCBs with
ing standards and wider adoption of by the Reserve Bank of India in 2004- the growth aspirations of larger ones
digital data in credit assessment. 05. At that time, the number of UCBs seeking wider geographical presence
and diversified business activities.
Sole proprietors continue to dominate stood at 1,926. The reduction reflects
Tier-I cities lead bank
Bank NPAs fall to lowest level in over a decade: RBI branch expansion; ATM

The asset quality of India's banking system continued to strengthen, with count declines in FY25
the gross non-performing asset (GNPA) ratio declining to a multi-decade low Bank branch expansion during FY25
of 2.1 per cent as at end-September 2025, according to the Reserve Bank was largely concentrated in tier-I cit-
of India's latest report. This marks an improvement from 2.2 per cent re-
ies, which accounted for nearly half of
corded at the end of March 2025, reflecting sustained balance-sheet repair
the new branches opened during the
across the sector.
year, according to the Reserve Bank of
The net non-performing asset (NNPA) ratio remained stable at 0.5 per cent India's Trends and Progress report. As
during the same period, underscoring improved provisioning and recoveries. of end-March 2025, scheduled com-
The RBI noted that the trend of declining NPAs, which began in 2018-19, con- mercial banks operated around 1.64
tinued through 2024-25, with GNPA ratios of scheduled commercial banks lakh domestic branches, reflecting a
falling to 2.2 per cent at end-March 2025 from 2.7 per cent a year earlier. year-on-year growth of 2.8 per cent.

In absolute terms, gross NPAs declined to Rs. 4.32 lakh crore in FY25 from Branch expansion slowed across tier-II
Rs. 4.81 lakh crore in FY24. Public sector banks recorded a sharp improve- to tier-VI centres, with the exception
ment, with GNPA ratios easing to 2.6 per cent from 3.5 per cent. Private of tier-IV locations. Private sector
sector banks saw a marginal decline to 1.8 per cent from 1.9 per cent, while banks accounted for 52 per cent of
foreign banks improved to 0.9 per cent from 1.2 per cent. In contrast, as- new branches opened in FY25, down
set quality of small finance banks weakened, with GNPA rising to 3.6 per from 65.5 per cent in the previous
cent from 2.4 per cent. year. R

10 | 2026 | FEBRUARY | BANKING FINANCE