Banking News for February 2026
Karur Vysya Bank launches Capital Gains Account Scheme
Karur Vysya Bank (KVB) has launched its Capital Gains Account Scheme (CGAS) after receiving authorisation from the Ministry of Finance, Government of India. The facility is available with immediate effect across KVB’s branch network, excluding rural branches.
The Capital Gains Account is a specialised deposit product for individuals and Hindu Undivided Families (HUFs) who have realised capital gains from the sale of assets such as property, land or securities. Under the Income Tax Act, 1961, capital gains can be exempt from tax if reinvested within a prescribed period. However, practical delays in identifying suitable investment avenues often extend beyond tax filing deadlines.
KVB’s CGAS allows taxpayers to park their capital gains in a designated account, thereby preserving eligibility for tax exemptions while complying with statutory requirements. The deposited amount earns interest during the interim period, offering both regulatory protection and financial returns.
The bank said the product is aimed at helping customers avoid rushed reinvestment decisions while remaining tax-compliant, providing a structured and secure mechanism for managing capital gains until long-term investment plans are finalised.
Fino outlines secured lending focus ahead of small finance bank transition
Fino Payments Bank plans to expand into secured lending through its extensive merchant network once it completes its transition into a small finance bank, according to Managing Director and CEO Rishi Gupta. The bank received in-principle approval from the Reserve Bank of India in early December 2025 for conversion into a small finance bank, enabling it to undertake lending activities after restructuring.
Gupta said Fino intends to hive off its business correspondent (BC) arm and adopt a transaction-led, digital-first banking model, distinguishing it from most small finance banks that evolved from microfinance institutions. With over 20 lakh merchants and 1.6 crore customers, including 60 lakh active UPI users, the bank plans to layer deposit and loan products onto existing payment relationships.
Fino currently holds deposits exceeding Rs. 3,000 crore at a cost of under 2 per cent. It expects to mobilise Rs. 600–800 crore annually to build a stable CASA base, supporting lower funding costs and scalable secured lending operations.
Central Bank of India reports strong credit growth in Q3 FY26
Central Bank of India posted a robust performance in the third quarter ended December 31, 2025, with gross advances rising 19.57 per cent year-on-year and total deposits growing 13.23 per cent, according to provisional regulatory filings.
As of December-end 2025, the bank’s deposits stood at Rs. 4,50,536 crore, while gross advances reached Rs. 3,23,773 crore. The strong credit expansion outpaced deposit growth, leading to an improvement in the credit-deposit ratio to 72.06 per cent, compared with 68.25 per cent a year earlier.
However, the CASA ratio moderated to 47.12 per cent from 49.18 per cent in December 2024, reflecting a shift in deposit mix amid competitive pricing conditions. Despite this, overall business momentum remained firm.
Total business, comprising deposits and advances, increased 15.80 per cent year-on-year to Rs. 7,74,309 crore as at December-end 2025, underlining sustained lending demand and balance sheet expansion during the quarter.
Exim Bank raises $1 billion through dual-tranche overseas bond issue
Export-Import Bank of India has successfully raised $1 billion from overseas markets through a dual-tranche, long-tenor U.S. dollar bond issuance, marking India’s first such offshore debt deal in 2026. According to merchant bankers involved in the transaction, the lender raised $500 million through 10-year bonds at a coupon of 5.00 per cent, priced at a spread of 85 basis points over the 10-year U.S. Treasury yield. A further $500 million was mobilised through 30-year bonds at a coupon of 5.75 per cent, at a spread of 95 basis points over the corresponding U.S. benchmark.
The pricing came in well inside initial guidance of 115–140 basis points, reflecting strong investor demand. Analysts at CreditSights noted that the achieved spreads were aggressive, with fair value estimated at 90–105 basis points. The bonds are rated BBB– by Fitch Ratings, in line with Exim Bank’s issuer rating.
The securities will be listed in Singapore, London and India. Proceeds will be used for general funding purposes, including financing overseas investments and imports of capital goods.
Tamilnad Mercantile Bank ties up with TechFini to strengthen UPI infrastructure
Tamilnad Mercantile Bank (TMB) has entered into a partnership with TechFini to enhance its UPI acquiring and issuing capabilities, as banks scale up digital payment infrastructure to support rising transaction volumes and advanced use cases. Under the arrangement, TechFini will act as a Technology Service Provider, enabling a cloud-native and scalable UPI backend for TMB.
The partnership will allow the bank to offer bank-anchored UPI services to payment aggregators, NBFCs, merchants and fintech companies, supporting high-volume payment and collection workflows. A key focus area is the expansion of UPI-based lending and collections. Through TechFini’s UPI Autopay solution, lenders working with TMB will be able to automate EMI and loan repayments using UPI e-mandates, improving efficiency and predictability while reducing reliance on cash or legacy mechanisms.
TechFini’s platform supports UPI acquiring, issuing, TPAP services, UPI plugins and Autopay, with infrastructure designed to handle up to 10,000 transactions per second. The collaboration reflects the growing trend of bank-fintech partnerships in India’s evolving UPI ecosystem.
SBI awards Rs. 1,000 crore ATM cash-outsourcing contract to CMS
State Bank of India has awarded a Rs. 1,000 crore, 10-year cash-outsourcing contract to CMS Info Systems, marking the first large-scale direct cash-management outsourcing deal by a public sector bank. The contract covers around 5,000 SBI-owned ATMs across the country and is scheduled to go live in January 2026.
Under the agreement, CMS will provide end-to-end managed services, including cash replenishment, logistics and technology support, with the objective of improving cash efficiency and ensuring higher ATM uptime. The move is expected to enhance service reliability for millions of SBI customers while optimising operational costs for the bank.
CMS Info Systems, which provides logistics and technology solutions to banks and fintech players, said the contract would deliver incremental revenue of about Rs. 500 crore over the tenure. According to the company, India’s ATM network faced significant disruptions in 2025, and CMS played a key role in stabilising operations during that period. The long-term contract is expected to strengthen CMS’s position in the cash-management services segment.
Axis Finance launches Vyapar business loan for MSMEs in semi-urban and rural markets
Axis Finance has announced the launch of Axis Finance Vyapar Business Loan, a collateral-free credit product aimed at improving access to formal finance for micro and small enterprises across semi-urban and rural India. The product is designed for entrepreneurs operating in retail, service and trading segments, offering loans of up to ₹10 lakh with flexible repayment tenures and no collateral requirement.
The new offering seeks to address the persistent credit gap faced by small businesses, particularly shopkeepers and service providers who often lack assets to pledge or formal credit histories. By eliminating collateral requirements, Axis Finance aims to make credit more inclusive and enable small entrepreneurs to meet working capital needs, expand operations and manage cash flows more efficiently.
Commenting on the launch, Sai Giridhar, Managing Director and Chief Executive Officer of Axis Finance, said micro and small entrepreneurs form the backbone of India’s economy. He noted that the Vyapar Business Loan is intended to support their growth aspirations by offering simple, accessible and timely finance.
The launch comes at a time when demand for unsecured MSME loans is rising, driven by improving credit assessment tools and increased focus on financial inclusion in non-metro markets.
Private bank reports ₹11.2 crore loan fraud involving education trust in Hooghly
A private sector bank has filed a police complaint alleging a ₹11.2 crore loan fraud involving an education trust that runs an engineering college in Hooghly district, West Bengal. According to the complaint, the trust, represented by three trustees, allegedly submitted forged collateral documents to secure multiple credit facilities from the bank.
The lender stated that the same property offered as collateral had already been mortgaged to another financier, while forged deeds were presented as genuine to obtain loans. The facilities were secured against three properties, including the educational institution’s property and two residential properties belonging to one of the trustees.
Following the complaint, an FIR was registered at Shakespeare Sarani police station on December 31, and the detective department has initiated an investigation. The bank alleged criminal conspiracy, cheating, forgery and use of forged documents in connection with three loan accounts.
Credit facilities aggregating ₹12 crore were sanctioned in February 2022, followed by an additional term loan of ₹3.4 crore in October 2022. The accounts turned irregular from mid-2024 and were classified as non-performing assets in October 2024. Recovery proceedings have since been initiated before the Debt Recovery Tribunal in Kolkata.
Asset quality of small finance banks worsens in FY25: RBI report
The asset quality of small finance banks (SFBs) deteriorated during 2024–25, with the gross non-performing assets (GNPA) ratio rising to 3.6 per cent at the end of March 2025 from 2.4 per cent a year earlier, according to the Reserve Bank of India’s Trends and Progress of Banking in India report.
Despite robust balance sheet growth, profitability of SFBs moderated during the year. Net profit declined sharply to ₹3,496 crore in FY25 from ₹6,219 crore in FY24, largely due to higher provisioning and contingency expenses amid rising stress in loan portfolios.
The combined balance sheet size of SFBs continued to expand at a double-digit pace, outstripping growth seen in other categories of scheduled commercial banks. Term deposits accounted for 73.9 per cent of total deposits as of end-March 2025, reflecting a relatively stable funding profile.
With deposit growth exceeding credit growth, the credit-deposit ratio of SFBs moderated to 86.4 per cent from 90.1 per cent a year earlier. The RBI report highlighted the need for tighter risk management and credit monitoring as SFBs scale up operations.
Maruti Suzuki partners Kerala Grameena Bank to expand vehicle financing access
Maruti Suzuki India Limited has signed a memorandum of understanding with Kerala Grameena Bank to offer vehicle financing solutions to customers across Kerala. The partnership aims to provide retail finance for new cars, pre-owned vehicles and commercial vehicles from Maruti Suzuki’s product portfolio.
Under the agreement, customers of Kerala Grameena Bank will gain access to a comprehensive range of financing options, including competitive interest rates and flexible repayment structures. The collaboration is expected to improve credit availability for customers in semi-urban and rural areas, where access to formal vehicle finance remains limited.
For Maruti Suzuki, the tie-up strengthens its retail finance network and supports vehicle sales by enhancing affordability for a wider customer base. The bank, in turn, expands its lending offerings and deepens engagement with customers seeking mobility solutions.
The MoU was signed in the presence of senior officials from both organisations, including Partho Banerjee, Senior Executive Officer (Marketing & Sales) at Maruti Suzuki, and Vimala Vijayabhaskar, Chairperson of Kerala Grameena Bank. The partnership aligns with broader efforts to improve financial inclusion and mobility across regional markets.
Small savings interest rates unchanged for eighth straight quarter
The government has decided to keep interest rates on small savings schemes unchanged for the January–March quarter of FY26, marking the eighth consecutive quarter of status quo on these rates. The decision applies to popular instruments such as the Public Provident Fund (PPF), Sukanya Samriddhi Scheme and National Savings Certificate (NSC), according to an office memorandum issued by the Ministry of Finance.
“The rates of interest on various Small Savings Schemes for the fourth quarter of FY26, starting from January 1, 2026, and ending on March 31, 2026, shall remain unchanged from those notified for the third quarter,” the memorandum said. Interest rates on small savings schemes are reviewed every quarter, and any revision is applicable only to fresh deposits or accretions during the review period.
As a result, deposits under the Sukanya Samriddhi Scheme will continue to earn 8.2 per cent interest, while the three-year term deposit rate remains at 7.1 per cent. The PPF rate has been retained at 7.1 per cent, and post office savings deposits will continue to earn 4 per cent. The decision provides stability to savers amid fluctuating market interest rates.
Payments banks’ deposits jump 57% to ₹25,605 crore in FY25
Deposits with payments banks rose sharply by 57 per cent year-on-year to ₹25,605 crore as of March 2025, according to the Reserve Bank of India’s latest Trends and Progress of Banking in India report. As of end-March 2025, six payments banks were operational in the country, with a combined network of 81 branches.
The RBI noted that during 2024–25, the combined balance sheet size of payments banks recorded strong growth, driven primarily by higher deposits on the liability side and investments on the asset side. Savings and current account deposits accounted for 68.1 per cent of total liabilities at the end of the financial year. On the asset side, investments were dominated by statutory liquidity ratio (SLR) securities, in line with regulatory restrictions that prohibit payments banks from undertaking lending activities.
The regulator also highlighted that payments banks have remained profitable for the third consecutive year in FY25. Operating profits improved due to higher interest income, even as non-interest income declined. Net profit stayed positive, though it moderated slightly owing to increased provisions and contingencies during the year.
Creditors cannot alter approved resolution plan: NCLAT
The National Company Law Appellate Tribunal (NCLAT) has ruled that the committee of creditors (CoC) cannot modify or alter a resolution plan once it has been approved, particularly with regard to the distribution of funds to dissenting creditors. The ruling came while dismissing an appeal filed by Bank of Baroda in the Reliance Communications Infrastructure insolvency matter.
The appellate tribunal held that while the CoC has wide commercial discretion in deciding various aspects of a resolution plan, including the manner of distribution, such discretion ends once the plan is approved. “After the commercial wisdom has been exercised by approving the resolution plan, modification of the distribution mechanism is impermissible and cannot be justified in the name of commercial wisdom,” the tribunal said.
The National Company Law Tribunal had earlier approved the resolution plan submitted by Reliance Projects & Property Management Services, a subsidiary of Jio. The plan was cleared by 68 per cent of the CoC’s voting share in August 2021. Although Bank of Baroda had voted in favour of the plan, some lenders, including IDBI Bank and State Bank of India, had dissented.
FSIB recommends Brajesh Kumar Singh as MD & CEO of Canara Bank
The Financial Services Institutions Bureau (FSIB) has recommended Brajesh Kumar Singh for appointment as managing director and chief executive officer of Canara Bank. Singh is currently serving as an executive director at Indian Bank. The recommendation follows an interaction process in which the Bureau evaluated 17 candidates for the top role on December 22.
In a statement, FSIB said the recommendation was made after assessing candidates’ performance during the interaction, overall experience, and other prescribed parameters. Singh was appointed executive director of Indian Bank on March 10, 2024, for a three-year term. An agriculture graduate from the Allahabad Agriculture Institute, he brings close to three decades of experience in the banking sector.
Before joining Indian Bank, Singh served in various capacities at Bank of Baroda, including as credit officer, branch head, and regional head, gaining extensive exposure across lending, operations, and leadership roles. His experience across public sector banks and familiarity with large-scale banking operations are expected to support Canara Bank’s strategic priorities amid a challenging operating environment marked by credit growth, asset-quality management, and digital transformation.
NRI deposit inflows moderate to $8.3 billion in April–October FY26
Inflows into non-resident Indian (NRI) deposit schemes moderated to $8.3 billion during April–October of FY26, down from $11.9 billion in the corresponding period last year, according to data released by the Reserve Bank of India. The slowdown was primarily driven by a sharp decline in inflows into foreign currency non-resident (bank) or FCNR (B) deposits.
RBI data showed that FCNR (B) deposits attracted inflows of $1.6 billion during the seven-month period, significantly lower than the $6.1 billion recorded a year earlier. The outstanding balance in FCNR (B) accounts stood at $31.88 billion at the end of October 2025. In contrast, non-resident external (NRE) deposits witnessed higher inflows of $3.9 billion during April–October FY26, compared with $3.0 billion in the same period last year, reflecting continued preference for rupee-denominated savings.
Overall outstanding NRI deposits rose to $168.78 billion at the end of October 2025, up from $162.69 billion a year ago. NRI deposits comprise FCNR, NRE, and non-resident ordinary (NRO) accounts and remain a stable source of foreign capital for the banking system.
IRFC to refinance ₹10,000 crore World Bank loan for freight corridor
Indian Railway Finance Corporation (IRFC) and the Dedicated Freight Corridor Corporation of India Ltd (DFCCIL) have signed an agreement to refinance ₹10,000 crore of foreign-currency loans availed from the World Bank for the Eastern Dedicated Freight Corridor. DFCCIL is the special-purpose vehicle responsible for developing dedicated rail freight corridors across the country.
The World Bank loans were originally raised for the ₹51,000 crore, 1,337-kilometre Eastern Dedicated Freight Corridor, which runs from Punjab to Bihar and connects key cargo hubs handling coal and major industrial raw materials. According to DFCCIL, the refinancing arrangement has been structured in close coordination with the Ministry of Finance, Ministry of Railways, IRFC, and the World Bank.
Describing the move as a historic first, DFCCIL said the refinancing is expected to generate savings of about ₹2,700 crore for the Government of India. The initiative aligns with the broader objective of reducing reliance on foreign currency debt and strengthening domestic financing capabilities. The refinancing is also seen as a step towards enhancing financial self-reliance while optimising long-term funding costs for large infrastructure projects critical to India’s logistics and economic growth.
Tracking UPI Autopay gets easier with central NPCI portal
The National Payments Corporation of India (NPCI) has tightened oversight of recurring UPI charges by launching a centralised portal that allows users to view and manage all UPI Autopay mandates in one place. The initiative aims to curb opaque billing practices and improve consumer control over subscriptions, particularly on e-commerce platforms where recurring debits are often triggered with limited visibility or exit options.
NPCI has introduced the portal, upihelp.npci.org.in, alongside a revised Autopay framework notified through a circular issued on October 7, 2025. Under the new rules, all Unified Payments Interface (UPI) members must implement the changes by December 31, 2025, while existing mandates will continue without disruption until then.
Consumers will now be able to see all active mandates across apps through a dedicated Autopay or “manage bank accounts” section in any UPI app. A key reform is mandate portability, allowing users to shift mandates between UPI apps, while merchants can migrate mandates across payment providers without changing terms. To prevent misuse, NPCI has introduced safeguards including mandatory UPI PIN authentication, a 90-day cooling period for mandate porting, restrictions on incentives, and tighter limits on the use of mandate data.
Total small business credit exposure rises 16% to Rs. 46 lakh crore
Aggregate credit exposure to India’s small business segment rose 16 per cent year-on-year to Rs. 46 lakh crore as of September 30, according to the CRIF High Mark–SIDBI report. The report highlighted that active loan accounts increased 11.8 per cent to 7.3 crore, supported by policy measures and multiple government-backed credit schemes for micro, small and medium enterprises (MSMEs).
Portfolio quality showed improvement across segments, with loans overdue by 91–180 days declining to 1.4 per cent in September 2025 from 1.7 per cent in September 2023. Enterprises displayed lower risk profiles, while sole proprietors also recorded steady improvement, aided by better underwriting standards and wider adoption of digital data in credit assessment.
Sole proprietors continue to dominate the credit ecosystem, accounting for around 80 per cent of total credit and nearly 90 per cent of borrowers. The fastest-growing segment is sole proprietors with an entity presence, which expanded 20 per cent year-on-year, driven largely by loans against property. As of September 2025, 23.3 per cent of borrowers were new to credit and 12 per cent were new to enterprise borrowing, indicating deeper formalisation. Working capital loans formed the bulk of enterprise credit, while term loans supported capital expenditure.
Banks report Rs. 21,515 crore frauds in first half of FY26: RBI
Banks reported 5,092 fraud cases involving Rs. 21,515 crore during the first half of FY26, according to data released by the Reserve Bank of India. This compares with 18,386 frauds amounting to Rs. 16,569 crore reported in the same period last year, indicating a sharp rise in the value of frauds despite a moderation in case numbers over time.
The RBI noted that while the total number of frauds declined in FY25 based on reporting dates, the amount involved increased significantly due to the re-examination and fresh reporting of 122 large fraud cases worth Rs. 18,336 crore. Based on the date of occurrence, card and internet frauds accounted for 66.8 per cent of cases by number in FY25, while advances-related frauds made up the largest share by value at 33.1 per cent.
Private sector banks accounted for 59 per cent of total fraud cases by number, whereas public sector banks contributed 70.7 per cent of the total amount involved. Within private banks, card and internet frauds dominated by volume, while advances-related frauds led by value. In public sector banks, advances-related frauds were the largest category by both number and amount. The RBI also observed a decline in card and internet frauds across bank groups, alongside a rise in advances-related frauds driven by reclassification.
Bank NPAs fall to lowest level in over a decade: RBI
The asset quality of India’s banking system continued to strengthen, with the gross non-performing asset (GNPA) ratio declining to a multi-decade low of 2.1 per cent as at end-September 2025, according to the Reserve Bank of India’s latest report. This marks an improvement from 2.2 per cent recorded at the end of March 2025, reflecting sustained balance-sheet repair across the sector.
The net non-performing asset (NNPA) ratio remained stable at 0.5 per cent during the same period, underscoring improved provisioning and recoveries. The RBI noted that the trend of declining NPAs, which began in 2018–19, continued through 2024–25, with GNPA ratios of scheduled commercial banks falling to 2.2 per cent at end-March 2025 from 2.7 per cent a year earlier.
In absolute terms, gross NPAs declined to Rs. 4.32 lakh crore in FY25 from Rs. 4.81 lakh crore in FY24. Public sector banks recorded a sharp improvement, with GNPA ratios easing to 2.6 per cent from 3.5 per cent. Private sector banks saw a marginal decline to 1.8 per cent from 1.9 per cent, while foreign banks improved to 0.9 per cent from 1.2 per cent. In contrast, asset quality of small finance banks weakened, with GNPA rising to 3.6 per cent from 2.4 per cent.
Number of urban co-operative banks declines to 1,457 in FY25
The number of urban co-operative banks (UCBs) in India declined to 1,457 at the end of March 2025, continuing a long-term consolidation trend initiated by the Reserve Bank of India in 2004–05. At that time, the number of UCBs stood at 1,926. The reduction reflects a regulatory push involving mergers of unviable entities, closures, and restrictions on issuing new licences.
During 2024–25, seven mergers of UCBs were effected, including six in Maharashtra and one in Telangana. With these, the cumulative number of mergers since 2004–05 rose to 163, more than half of which involved banks in Maharashtra. In addition, licences of eight non-scheduled UCBs were cancelled during the year, covering institutions in Uttar Pradesh, Andhra Pradesh, Bihar, Maharashtra, Assam, and Tamil Nadu.
The RBI noted that in December 2022 it introduced a four-tiered regulatory framework for UCBs, based on the recommendations of an expert committee chaired by N S Vishwanathan. The framework aims to balance the cooperative character of smaller UCBs with the growth aspirations of larger ones seeking wider geographical presence and diversified business activities.
Tier-I cities lead bank branch expansion; ATM count declines in FY25
Bank branch expansion during FY25 was largely concentrated in tier-I cities, which accounted for nearly half of the new branches opened during the year, according to the Reserve Bank of India’s Trends and Progress report. As of end-March 2025, scheduled commercial banks operated around 1.64 lakh domestic branches, reflecting a year-on-year growth of 2.8 per cent.
Branch expansion slowed across tier-II to tier-VI centres, with the exception of tier-IV locations. Private sector banks accounted for 52 per cent of new branches opened in FY25, down from 65.5 per cent in the previous year. Public sector banks, however, focused more on rural and semi-urban outreach, with 67.3 per cent of their new branches opened in these areas, compared to 37.5 per cent for private banks.
The total number of ATMs declined modestly during the year, driven by a reduction in off-site ATMs, even as on-site installations increased. The RBI attributed this trend partly to the growing adoption of digital payments, which has reduced customers’ dependence on ATMs. Public sector banks continued to hold the largest share of ATMs, followed by private sector banks and white-label ATM operators.
Positive business outlook drives banks to step up hiring for sales roles
Banks are ramping up hiring for sales personnel in secured lending segments such as home loans, vehicle loans and gold loans, as improving business sentiment and supportive regulatory measures spur growth, industry experts said. The renewed focus on sales roles marks a clear shift from the cautious hiring environment seen earlier, when recovery and collections dominated recruitment priorities.
Data from TeamLease Services shows that over the past six months, banks have increased hiring for sales staff by around 10–15 per cent, supported by regulatory adjustments and cost recalibration by lenders. Mid-sized private banks and non-banking financial companies (NBFCs) are leading this trend, particularly as they expand aggressively in Tier-II and Tier-III cities to capture incremental market share.
“Hiring momentum is significantly higher among mid-sized private banks and NBFCs, which are scaling their frontline presence to grow newer lending products and localised operations,” said Balasubramanian A, senior vice-president at TeamLease Services. In contrast, large private banks are following a calibrated strategy, relying more on technology-led productivity and cost optimisation.
The improved outlook is also linked to monetary easing. The central bank cut the policy repo rate by 25 basis points in December, taking cumulative rate cuts in 2025 to 125 basis points. Bankers expect the benefits of lower funding costs to gradually translate into stronger credit growth, reinforcing confidence in a robust business environment ahead.
Bank deposits and advances multiply over two decades, credit growth outpaces deposits
India’s banking system has witnessed manifold expansion over the past two decades, with deposits and advances rising sharply between FY05 and FY25, according to a report by the State Bank of India’s economic research department. Bank deposits increased from Rs. 18.4 lakh crore in FY05 to Rs. 241.5 lakh crore in FY25, while advances surged from Rs. 11.5 lakh crore to Rs. 191.2 lakh crore over the same period.
The report highlighted that the pace of growth has been significantly faster for advances than for deposits. As a result, the credit-deposit (C-D) ratio climbed from 69 per cent in FY21 to 79 per cent in FY25, reflecting stronger credit demand and deeper financial intermediation.
However, economists flagged rising risk sensitivity due to the rapid expansion of unsecured lending. Unsecured advances rose from Rs. 2 lakh crore in FY05 to Rs. 46.9 lakh crore in FY25, with their share increasing to 24.5 per cent from 17.7 per cent. Contingent liabilities of scheduled commercial banks also expanded nearly 18 times over the period, driven largely by forward exchange contracts.
Despite these risks, the report noted a strong post-pandemic balance sheet revival. Bank assets grew from 77 per cent of GDP in FY21 to 94 per cent in FY25, signalling renewed credit intermediation and financial deepening in the economy.
New labour codes push up operating expenses for private banks and insurers
The implementation of new labour codes, notified by the central government in November 2025, has led to a noticeable rise in employee costs for private-sector banks and insurance companies, with higher operating expenses reported in the October–December quarter (Q3FY26). Several large lenders and insurers have disclosed one-time and recurring cost impacts arising from changes in wage and benefit structures.
HDFC Bank reported operating expenses of Rs. 18,770 crore in Q3FY26, up from Rs. 17,110 crore in the previous quarter, after recognising an estimated incremental employee cost impact of around Rs. 800 crore. ICICI Bank also disclosed an additional expense impact of about Rs. 145 crore, while Yes Bank, Federal Bank and RBL Bank reported incremental provisions of Rs. 155 crore, Rs. 20.8 crore and Rs. 32 crore, respectively.
Private-sector insurers faced similar pressures. HDFC Life Insurance estimated an incremental employee benefit cost of Rs. 106.02 crore, while ICICI Prudential Life Insurance and ICICI Lombard General Insurance reported impacts of Rs. 11.04 crore and Rs. 53.06 crore, respectively.
Analysts noted that the new labour codes require a higher proportion of basic pay and allowances, increasing employer contributions towards gratuity and pension funds. In contrast, public sector banks were largely insulated, as their existing salary structures were already aligned with the new framework.
