Banking sector shows strong recovery in 2025 on reforms, digital push: DFS

The Department of Financial Services (DFS), which operates under the Ministry of Finance, said that the year 2025 was a year of increased financial stability and good governance, as it reported that the banking reforms, digital payments, and financial inclusion made significant progress during this year, according to a year-end review published on Saturday.

Major reforms and policy initiatives drive financial access

DFS paved the way for even more reforms in 2025, one very influential change to provide the public with pervasive access to financial services, and the firm foundation built through the Your Money, Your Right Campaign, Banking Laws (Amendment) Act, 2025, EASE 8.0 embarked on the journey of EASE₹ise, 'Credit Line on UPI', 'Hello! UPI'- AI-voice-enabled payment feature, NPA management, financial inclusion, customer service enhancement, digital transformation, and many others remained firm and supportive.

Asset quality improves across Indian banking sector

According to the Financial Ministry, the Indian banking sector viewed a significant improvement in asset quality, where the Gross NPA ratio of Scheduled Commercial Banks (SCBs) fell to a meagre 2.22 per cent by March 2025, while the Public Sector Banks (PSBs) registered a GNPA ratio of 2.58 per cent. The Provision Coverage Ratio also increased to a very high percentage of 93.14, which indicates that the sector was stronger and more resilient.

Digital payments witness rapid growth under DIGIDHAN mission

In digital payments, the DFS continued to be the leader in this field, driving consistent growth due to the DIGIDHAN Mission. It is said that the total digital payment transactions volume reached 22,831 Crore in FY 2024-25 with a CAGR of 41 per cent starting from 2,071 crore in FY 2017-18. Also, the value of transactions has increased from Rs 1,962 lakh crore to Rs 3,509 lakh crore.

Record profits for public sector and commercial banks

The Public Sector Banks experienced an incredible boom with their profits reaching an unprecedented high, resulting in an aggregate net profit of Rs 1.78 lakh crore for the financial year 2024-25. During the same period, Scheduled Commercial Banks reported a record profit of Rs 4.01 lakh crore due to improved credit growth and decreased stress levels.

Financial inclusion programs like Pradhan Mantri Jan Dhan Yojana, PM Mudra Yojana, Atal Pension Yojana, and insurance schemes extended their reach and positively impacted millions of people, especially those from disadvantaged communities. By the end of December 2025, Jan Dhan accounts reached over 570 million, with total deposits surpassing Rs 280 billion.

Through legislative measures, the government not only improved the banking sector’s governance but also enacted the Banking Laws (Amendment) Act, 2025, which allowed insurance companies to raise the foreign direct investment limit to 100 per cent as part of their sectoral reforms.

The “Your Money, Your Right” campaign, which was launched on a national scale, also made it possible for the rightful owners of unclaimed financial assets to receive back over Rs 4,500 crore.