India's banking system continues its strong recovery trajectory with the latest data showing a significant decline in bad loan provisions during the September quarter. The sector's improving fundamentals, combined with better collection efficiency and falling slippages, are positioning banks for enhanced profitability in the December quarter.

Provisions Drop to Seven-Quarter Low

The banking sector's provisioning landscape has shown remarkable improvement in recent quarters:

Sector-Wise Provisioning Performance

The improvement in provisioning has been led primarily by public sector banks, with 10 out of 12 PSU banks reporting year-on-year declines. Notable exceptions include State Bank of India and Indian Overseas Bank, which recorded increases during the quarter.

Private sector banks showed a contrasting trend with a 22.00% jump in NPA provisioning, reflecting varied portfolio performance across different banking segments.

Asset Quality Trends Continue Positive Trajectory

The broader asset quality metrics reinforce the sector's recovery momentum:

December Quarter Outlook and RoA Prospects

Analysts expect the positive provisioning trend to continue supporting bank profitability. JM Financial notes that "asset quality remains broadly stable across banks, with slippages moderating and collection efficiencies improving through the second quarter and into the third quarter." The firm expects overall credit costs to remain around 0.60% in the December quarter.

Motilal Oswal anticipates that while major public and private sector banks will report contained credit costs, mid-sized private banks with higher exposure to unsecured and microfinance portfolios should see improving credit costs as stress abates, supporting better RoA outlook in the second half and beyond.

Risk Management and Portfolio Quality

Despite overall improvements, certain segments continue requiring monitoring:

• Micro-LAP portfolios showing selective stress
• Commercial vehicle financing segments
• Affordable housing loan categories
• Select microfinance institution portfolios

However, prudent lending practices remain evident, with 69.00% of gold loan disbursements directed toward prime-and-above borrowers, and over 70.00% of consumer loans from private banks extended to similar quality borrowers.

Recovery Momentum Strengthens

The combination of falling provisions, improving collection efficiency, and declining slippages indicates that the financial stress from pandemic and interest rate cycles is gradually subsiding. Analysts expect banks to demonstrate improved performance from the December quarter onwards, supported by rising credit growth, easing cost of funds pressure, and continued asset quality improvement.

This sustained recovery trajectory positions the Indian banking sector for enhanced stability and profitability in the coming quarters, with return on assets expected to benefit from the improving operational metrics.

Bank of India and other banks in Uttar Pradesh will remain closed on January 3, 2026, to mark the birth anniversary of Hazrat Ali, as per the Reserve Bank of India's holiday calendar list. However, banks in the rest of the country are scheduled to remain operational as it is the first Saturday of the month.

RBI Saturday Holiday Guidelines

According to the RBI, all scheduled and non-scheduled banks observe public holidays on the second and fourth Saturdays of each month. The following Saturday closures are scheduled for January 2026:

Digital Banking Services Continue

Banks may close their branches on holidays, but digital banking services remain fully functional. The following services continue to operate during branch closures:

• ATMs remain accessible
• UPI payments function normally
• Internet banking services active
• Online facilities continue operation

This ensures customers do not face disruption in essential banking services even during regional holidays.

Complete January 2026 Bank Holiday Schedule

The RBI holiday list details closures across different states throughout January 2026:

Additionally, banks remain closed on all Sundays: January 4, 11, 18, and 25.

Holiday Classification System

The RBI classifies bank holidays into three main categories:

• Holidays under the Negotiable Instruments Act
• Banks' Closing of Accounts
• Real-Time Gross Settlement (RTGS) Holidays

State-specific regional festivals and cultural events lead to holidays that vary by location, with digital banking remaining active during these branch holidays. In case of doubt, it is advisable to verify a bank branch's working hours before visiting and confirm it will be operational on that particular day.