New Delhi [India], August 24 (ANI): Indian banks are in their best shape in a decade, with non-performing assets (NPAs) near historic lows and balance sheets strengthened by robust capital buffers, Motilal Oswal Financial Services Ltd said in a post on social media platform X.

The financial services firm highlighted the significant improvement in the health of the banking sector, pointing to cleaner balance sheets and stronger fundamentals as key factors supporting the outlook for Indian banks.

'Indian banks are in their best shape in a decade. NPAs are near historic lows,' Motilal Oswal said in its post on X.

The assessment comes against the backdrop of a sustained improvement in asset quality across the banking system. According to recent banking-sector data, gross non-performing assets of scheduled commercial banks fell to a multi-decadal low of around 1.8 per cent in March 2026, while net NPAs stood at about 0.4 per cent.

Capital adequacy also remained comfortable.

Motilal Oswal's assessment underlines how the banking sector has emerged stronger after a prolonged clean-up of stressed assets and balance-sheet repair. The improvement in asset quality has also been accompanied by stronger profitability and adequate capital, providing banks with greater capacity to support credit growth.

The firm's observations are broadly in line with the Reserve Bank of India's assessment of the banking system.

The central bank's latest Financial Stability Report showed that banks remained resilient, with strong capital buffers and the ability to withstand severe stress scenarios.

Motilal Oswal has also pointed to the implications of stronger bank balance sheets for the broader credit cycle. With NPAs at historically low levels and capital positions remaining healthy, banks are better placed to expand lending while maintaining prudent underwriting standards.

The improvement in asset quality marks a sharp turnaround from the stress witnessed during the previous decade, when elevated corporate leverage and mounting bad loans weighed on bank profitability and constrained credit growth.

The firm's bullish assessment also comes as credit growth has regained momentum. System-wide bank credit growth accelerated to 14.5 per cent year-on-year during 2025-26, while deposit growth stood at 11.5 per cent, according to data cited in recent assessments of India's financial system.

Motilal Oswal's view suggests that the banking sector could remain an important beneficiary of the improving credit cycle, particularly as healthier corporate balance sheets and sustained economic activity support demand for loans. (ANI)