India’s banking industry has seen some dramatic changes in the last two years. From digital payment modes to new RBI policies and government schemes, everything has changed. While banks experienced a good run in 2024, 2025 appears to have its share of problems—tightened liquidity, asset quality issues, and regulatory reforms. Let’s go deeper.
The Digital Boom & Financial Inclusion
Technology is at the forefront of banking. UPI transactions have reached over 6.5 billion in the fourth quarter of 2024, and cashless payments have become a habit for millions. The Digital Rupee is also gaining momentum, providing individuals with an alternative means to manage money online.
Financial inclusion is another area where things are moving fast. The Jan Dhan Yojana has pulled more people into the banking system, especially in villages. On top of that, SBI’s YONO app now has over 75 million users, proving that digital banking is no longer just for city folks.
New RBI Rules & Their Impact
The Reserve Bank of India (RBI) isn’t sitting either. Banks shall implement the Expected Credit Loss (ECL) model from April 2025—this shall make banks prudent in lending. The liquidity coverage ratio (LCR) too is being enhanced by 5%, so banks have sufficient cash buffers to hold against financial distress.
But not all smooth sailing. RBI banned Kotak Bank from onboarding new digital customers in early 2024 on account of IT issues. The action indicates the regulator is watching banking infrastructure closely.
Government Reforms: Greater Support for Businessmen & Farmers
The Union Budget 2025 arrived with a slew of banking-related reforms:
- ₹15,000 crore SWAMIH Fund: To finish halted housing projects and assist homebuyers.
- MSME Boost: Loan guarantee cover doubled to ₹10 crore from ₹5 crore. The new categorization also facilitates easier funding for small enterprises.
- Kisan Credit Card (KCC) Expansion: The loan limits have been raised to ₹5 lakh from ₹3 lakh. Farmers will be able to access credit more easily.
- New Micro-Enterprise Credit Cards: A ₹5 lakh credit card for small enterprises registered on the Udyam portal.
- MUDRA Loans for Homestays: This will be helpful for small tourism operators such as homestay owners.
Public vs Private Banks: Who’s Doing Better?
Banks have struggled hard to declutter their balance sheets in the past few years. Public sector banks (PSBs) cut their Gross NPA (GNPA) ratio from 14.2% in 2018 to a mere 3.15% in 2024. Private banks have done even better—cutting their GNPA from 4.53% to 1.9%.
The private sector is growing rapidly thanks to its customer-first approach and tech adoption. But PSBs are catching up, focusing on expanding credit access and financial inclusion.
New Fixed Deposit Schemes: Higher Returns for Investors
Banks have rolled out new FD schemes in 2025 to attract depositors:
- SBI’s “Har Ghar Lakhpati” RD Plan – Helps customers save ₹1 lakh or more over time.
- SBI Patrons FD – Especially for senior citizens (80+), with higher interest rates.
- PNB’s New FD Schemes – 303-day FD with 7% and 506-day FD with 6.7%.
- IDBI Bank’s Super Senior Citizen FD – Interest up to 8.05% for certain tenures.
- Bank of Baroda’s Liquid FD – Enables partial withdrawal without liquidating the entire deposit.
Challenges Ahead: Liquidity, Loan Growth & Cybersecurity
Banks have improved, but 2025 won’t be a walkover. Some of the main issues are:
- Liquidity Squeeze – More stringent regulations and reduced cash flow could impede lending.
- Loan Growth Slowing – The credit-deposit (CD) ratio dropped to a three-year low in late 2024.
- NPA Risks – In spite of the improvement, the risk of bad loans rising remains.
- Cyber threats – More Internet banking equals increased chances of cyber fraud and hacking.
Looking Ahead
India’s banking industry is racing ahead, juggling growth and challenges. The spotlight is on digital banking, financial inclusion, and tighter regulations to keep banks fit. While new schemes and policies usher in new opportunities, liquidity management and asset quality will be key in 2025. The future seems bright but with turns—banks will have to remain agile to navigate the changing scenario.
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