The assessment points to a turnaround after years spent resolving stressed loans and strengthening bank finances. MoSL says these efforts have improved profitability and given lenders more room to expand, rather than remain weighed down by past problem accounts.

For scheduled commercial banks, gross non-performing assets fell to about 1.8% by March 2026, a low not seen in several decades. Net NPAs were 0.4%. These figures indicate a much smaller burden of troubled loans, although careful assessment of new borrowers remains important.

Most banks also have comfortable capital adequacy, according to the report. These financial cushions help lenders absorb risks while supporting business growth. MoSL’s assessment is broadly consistent with recent RBI Financial Stability Reports, which describe banks as resilient even under severe economic stress.

Bank credit expanded 14.5% year-on-year in 2025-26, compared with deposit growth of 11.5%. Lending therefore grew faster than the funds coming in through deposits. MoSL sees stronger bank finances as helping lenders manage this gap, while healthy corporate balance sheets and economic activity are expected to sustain demand for loans.