NBFC Balance Sheets Expand 18.9% in FY25 Despite Microfinance Stress: RBI Report

Non-banking financial companies (NBFCs) demonstrated robust growth in FY25 with balance sheets expanding significantly, even as the microfinance segment faced mounting stress, according to the Reserve Bank of India's latest Trend and Progress of Banking in India report.

Strong Balance Sheet Growth and Profitability

The NBFC sector recorded substantial expansion during FY25, driven primarily by strong growth in loans and advances:

Financial Metrics	March 2025	March 2024	Growth
Total Balance Sheet	₹61.09 lakh crore	₹51.39 lakh crore	18.90%
September 2025 Balance Sheet	₹65.51 lakh crore	-	7.20% (H1 FY26)
Upper Layer NBFC Net Profit	₹48,873 crore	₹38,618 crore	26.50%
All NBFCs Net Profit	₹1.32 lakh crore	₹1.40 lakh crore	-5.70%

Upper layer NBFCs reported ₹27,019 crore in profits during the first six months ended September 2025, reflecting continued strong performance in the current fiscal year.

Asset Quality Shows Mixed Trends

Overall asset quality of the NBFC sector improved during FY25, with broad-based improvements across most categories:

Asset Quality Indicators	March 2025	March 2024	Change
Overall GNPA Ratio	2.90%	3.50%	-0.6 percentage points
Overall NNPA Ratio	Improved	Higher	Decline
NBFC-MFI GNPA Ratio	4.10%	2.00%	+2.1 percentage points
NBFC-MFI NNPA Ratio	1.20%	0.60%	+0.6 percentage points

The RBI noted that the share of standard assets in aggregate credit extended by NBFCs rose, alongside a decline in sub-standard and doubtful assets, reflecting effective resolution of bad loans and adequate provisioning.

Microfinance Segment Faces Challenges

While the broader NBFC sector showed improvement, the microfinance segment remained an outlier with sharp deterioration in asset quality. NBFC-MFIs experienced significant stress, with the GNPA ratio more than doubling from 2.0% to 4.1% during FY25. The RBI attributed this deterioration to underlying stress in the segment and recovery challenges faced by microfinance institutions.

Current Regulatory Framework Structure

The scale-based regulation framework continues to categorize NBFCs into three distinct layers:

Layer Category	Asset Share	Regulatory Approach
Upper Layer (NBFC-UL)	30.20%	Most stringent regulations
Middle Layer (NBFC-ML)	64.60%	Government-owned entities
Base Layer (NBFC-BL)	5.20%	Least regulatory burden

As of end-September 2025, GNPA and NNPA ratios of the overall NBFC sector remained unchanged from end-March levels, indicating stabilization in asset quality trends. However, within larger NBFCs, asset quality trends showed mixed results, with upper-layer NBFCs maintaining unchanged GNPA ratios while NNPA worsened due to declining provisions.

The Indian banking sector experienced divergent employment trends in fiscal 2025, with private sector banks reducing their workforce while public sector banks expanded their employee base, according to data released by the Reserve Bank of India on Monday.

The contrasting hiring patterns reflect different strategic priorities across banking segments, with the overall banking system still managing to achieve net employment growth driven primarily by smaller financial institutions.

Employment Trends Across Banking Segments

The employment data reveals significant variations between different categories of banks during fiscal 2025:

Bank Category	FY25 Employees	FY24 Employees	Change
Public Sector Banks	7,57,641	7,56,015	+1,626
Private Sector Banks	8,38,150	8,45,407	-7,257
Small Finance Banks	1,77,000	~1,61,000	~+16,000
Total Banking System	18.08 lakh	17.87 lakh	+21,000

Public sector banks demonstrated modest growth, increasing their workforce by 1,626 employees to reach 7,57,641. In contrast, private sector banks reduced their employee count by 7,257, bringing the total to 8,38,150 in fiscal 2025.

Major Bank Performance

Among the largest lenders, employment changes varied significantly based on individual bank strategies and operational requirements:

Bank	FY25 Employees	FY24 Employees	Change
State Bank of India	2,36,226	2,32,296	+3,930
HDFC Bank	2,14,521	2,13,527	+994
ICICI Bank	1,30,957	1,41,009	-10,052

State Bank of India, the country's largest lender, reported an increase in overall employees to 2,36,226 from 2,32,296 in the previous year. HDFC Bank's workforce grew marginally to 2,14,521 in fiscal 2025 from 2,13,527 in fiscal 2024.

ICICI Bank, the country's second-largest private sector lender, showed the most significant decline, reducing its employee base to 1,30,957 from 1,41,009 in fiscal 2024.

Small Finance Banks Drive Growth

Small finance banks emerged as the primary driver of employment growth in the banking sector, adding approximately 16,000 employees to reach a total workforce of 1.77 lakh people. This segment's expansion significantly contributed to the overall positive employment trend in the banking system.

AU Small Finance Bank stands out as the largest employer among small finance banks with 50,946 staff members. The bank, which received in-principle approval to convert into a universal lender, had 29,738 employees at the end of fiscal 2024. The merger with Fincare SFB, which started from April 1, 2024, added 15,329 employees to its workforce.

Banking Sector Employment Overview

The overall banking system's employee count increased to 18.08 lakh from 17.87 lakh in the year-ago period, representing net growth of 21,000 jobs despite the reduction in private sector bank employment. This growth pattern indicates the evolving landscape of India's banking sector, where smaller financial institutions are expanding their operations and workforce while some established private banks are optimizing their employee structures.