The Reserve Bank of India's latest report on banking trends for FY25 reveals a notable shift in India's financial infrastructure, with ATM numbers declining while bank branches continue expanding. The comprehensive analysis highlights how digital payment adoption is reshaping the country's banking landscape as of March 31, 2025.

ATM Network Contracts Amid Digital Surge

The total number of ATMs across India declined to 2,51,057 units as of March 31, 2025, down from 2,53,417 in the previous year. This decline was primarily driven by strategic decisions from both public and private sector banks to reduce their ATM footprints by shutting down offsite ATMs.

The RBI attributed this decline to the "increase in digitalisation of payments" which has "reduced the customers' requirement of transacting with ATMs." While both public and private sector banks contributed to this reduction, independently-run white label ATMs showed growth, increasing from 34,602 to 36,216 units.

Geographic Distribution Patterns

The report highlighted distinct deployment strategies across different bank categories. Public sector banks maintained an even distribution of ATMs across rural, semi-urban, urban, and metropolitan areas. In contrast, private sector banks and foreign banks concentrated their ATM networks primarily in urban and metropolitan regions, reflecting their customer base preferences.

Branch Network Expansion Continues

Despite the rise of digital banking channels, physical bank branches experienced robust growth of 2.80%, reaching 1.64 lakh branches nationwide in FY25. This expansion contradicts expectations that digital alternatives would reduce the need for physical banking infrastructure.

Public sector banks drove this growth aggressively, with their share of new branch openings increasing significantly. The distribution of new branch openings showed a marked shift in strategy:

Banking Access and Account Growth

The banking sector continued expanding financial inclusion through various initiatives in FY25. Basic Savings Bank Deposit Accounts (BSBDAs) grew by 2.60% to reach 72.40 crore accounts, while the aggregate balance in these accounts increased substantially by 9.50% to ₹3.30 lakh crore.

The report emphasized that a majority of BSBDAs continue operating through the business correspondent model, demonstrating its effectiveness in reaching grassroots customers across the country.

Deposit Insurance Coverage Analysis

From a deposit insurance perspective, coverage remained comprehensive with 97.60% of accounts protected under the current framework as of end-FY25. However, when measured by insured deposit value, the coverage ratio decreased to 41.50% from 43.10% in the previous year, indicating growth in higher-value deposits that exceed the ₹5.00 lakh coverage limit per account.

The findings reflect India's evolving banking ecosystem, where digital payments are reducing ATM dependency while physical branches remain crucial for comprehensive banking services, particularly in rural and semi-urban markets.

The Reserve Bank of India released its Report on Trend and Progress of Banking in India 2024-25, highlighting exceptional performance by scheduled commercial banks with combined net profit rising 14.8% year-on-year to ₹4.01 lakh crore during FY25. The comprehensive assessment reveals that banks have achieved historic milestones in both profitability and asset quality while maintaining strong capital reserves and operational resilience.

Record Profitability and Historic Asset Quality Achievements

The banking sector demonstrated exceptional resilience in FY25, with scheduled commercial banks posting robust profit growth despite a moderation from the previous year's 32.8% increase when profits reached ₹3.50 lakh crore in FY24. The sector maintained double-digit expansion in balance sheets, with deposits and credit growth continuing in double digits, reflecting sustained momentum in core banking operations.

Asset quality continued to improve significantly, with the gross non-performing assets ratio declining to a multi-decadal low of 2.2% by end-March 2025, and further to 2.1% by end-September 2025. This achievement reflects sustained stress resolution efforts and enhanced credit underwriting practices across the banking system.

Strong Capital Buffers and Robust Profitability Metrics

Capital buffers remained exceptionally strong throughout FY25, with the capital to risk-weighted assets ratio of scheduled commercial banks standing at 17.4% by end-March 2025, marginally easing to 17.2% by end-September 2025. These levels remain well above regulatory requirements, providing substantial cushions for future growth and potential stress scenarios.

Profitability metrics demonstrated the sector's improved earnings profile, with return on assets at 1.4% and return on equity at 13.5% in FY25. During the first half of FY26, RoA and RoE stood at 1.3% and 12.5% respectively, indicating continued strong performance.

Broader Financial System Shows Steady Improvement

The RBI report highlighted steady improvement across other segments of the financial system beyond commercial banks. Urban co-operative banks recorded higher balance sheet growth in FY25 compared to FY24, while their asset quality improved for the fourth consecutive year, indicating sustained recovery in this segment.

Non-banking financial companies continued to post double-digit credit growth, supported by robust capital buffers. The NBFC sector's asset quality also improved during the year, contributing to the overall strength of India's financial ecosystem.

Financial System Resilience and Strategic Outlook

The RBI emphasized that strong banking sector fundamentals provide a buffer against risks, which together with prudent regulation create conditions for sustained credit flow. The combination of record profitability, multi-decadal low NPAs, and strong capital reserves across banks and NBFCs creates a robust foundation for supporting India's economic growth while maintaining high prudential standards and operational security.