Record profits and lower NPAs (around 2.1%) reflect structural balance sheet repair, not just a credit upswing
Digital, cash-flow-based lending through DPI and TReDS is transforming MSME financing and formalisation
PSBs are balancing corporate and retail growth while investing in AI and digital tools to strengthen efficiency, risk control, and customer experience
'Indian Banks Profit Revival Is Not Just a Credit Cycle', Says Bank of Baroda's Beena Vaheed
Beena Vaheed highlights that Indian banking’s recent profitability reflects structural clean-up rather than cyclical gains, with PSBs reporting record profits, lower NPAs, and improved governance standards
Beena Vaheed, Executive Director, Bank of Baroda
Summary
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At a time when India’s banking sector is reporting record profits and stronger balance sheets, the role of women in the financial ecosystem is steadily expanding. On the occasion of International Women’s Day 2026, Beena Vaheed, Executive Director at Bank of Baroda, says the progress is no longer symbolic but structural.
“Progress is both real and measurable,” Vaheed told Outlook Business in an interview. Women today account for over 55% of Jan Dhan accounts and nearly 26% of retail borrowers, she notes, while pointing to consistently strong credit behaviour among female borrowers.
According to Vaheed, government-led financial inclusion initiatives have helped move the conversation beyond access to finance toward “meaningful economic participation and structural empowerment”. The change is also visible within the banking hierarchy.
Her remarks come at a time when Indian banks are operating from a position of renewed strength. Scheduled commercial banks reported around ₹4 lakh crore in net profits in FY25, with public sector banks contributing nearly ₹1.78 lakh crore, while gross non-performing assets have declined to around 2.1%, among the lowest levels in years.
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Vaheed argues that this resurgence reflects deep structural repair rather than a short-lived credit cycle.
Edited Excerpts:
As we celebrate Women's Day, how much of the progress we talk about in Indian banking is real? And what, in your view, is the biggest bottleneck holding women back from the top?
Progress is both real and measurable. Women today account for over 55% of Jan Dhan accounts and nearly 26% of retail borrowers, with consistently strong credit behaviour. Government initiatives such as Jan Dhan and Mudra have moved the narrative beyond access to meaningful economic participation. What we are seeing is structural empowerment, not incremental change.
Within public sector banks, women have already led flagship institutions such as the State Bank of India (SBI). The next opportunity lies in widening leadership exposure across core P&L roles—corporate credit, RAM credit and field leadership. As more women gain experience in these high-impact operating areas, the pathway to management roles becomes even stronger. With institutional commitment and policy support aligned, the momentum is firmly in the right direction.
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Indian banks are reporting strong profits again. What could be the key driver of this growth? Are banks riding a credit cycle?
The current profitability is the outcome of sustained reforms by the government, the regulators and banks themselves, not just a cyclical upswing. Government recapitalisation, the Insolvency and Bankruptcy framework, and stronger governance standards have fundamentally improved bank balance sheets. What we are seeing now is operating leverage on a much healthier base.
In FY25, scheduled commercial banks reported aggregate net profits of about ₹4 lakh crore, with public sector banks contributing ₹1.8 lakh crore — a 26% year-on-year increase. Gross NPAs have declined to around 2.1%, and credit costs are at multi-year lows. Credit growth at roughly 12% remains healthy, but banks are also recalibrating towards secured retail, MSME and capex-linked lending.
The next phase of growth will be defined by sustaining diversified credit growth, strengthening deposits, ensuring profitability remains durable rather than cyclical.
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MSMEs remain central to India's growth story, yet access to credit is uneven. What is the missing link between the two here?
MSMEs contribute nearly 30% of GDP and about 46% of exports, yet credit access has long been constrained by limited formal data and heavy reliance on collateral. The missing link has been dependable cash-flow visibility. India’s Digital Public Infrastructure is now enabling a decisive shift toward data-led, cash-flow-based lending.
Public Sector Banks are actively leveraging the Account Aggregator framework and platforms such as TReDS — which processed around ₹2.35 lakh crore in FY25 — to underwrite using GST data, receivables and digital payment trails. For PSBs, MSME sourcing through digital channels and ecosystem partnerships has accelerated significantly, reducing turnaround time for smaller borrowers.
As MSMEs anchor the Viksit Bharat transformation, their scale‑up and formalisation will translate into strong, long‑term credit momentum for PSBs.
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Indians are increasingly moving savings from bank deposits to the stock market. Does the shift towards market-linked products fundamentally challenge the traditional deposit-driven banking model?
The rise of market-linked products reflects a maturing financial system, not a weakening of banks. With deposits exceeding ₹250 lakh crore, banks remain the primary repository of household savings. Equity participation is growing, but it complements — rather than replaces — the deposit franchise.
Public Sector Banks are adapting by deepening engagement beyond traditional savings accounts. A payments-led CASA strategy, expansion of merchant acquiring networks and stronger digital integration ensure that banks remain the core transactional hub. For PSBs, QR and POS expansion has helped anchor merchant and retail relationships, keeping balances stable even as customers diversify into investments.
By integrating deposits, payments, insurance and investment distribution on a single platform, PSBs are evolving into full-service financial partners. The model is not being disrupted; it is being strengthened through diversification.
Deposit growth is lagging credit growth. Is this a temporary imbalance, or a structural warning sign for the banking system?
Deposit growth trailing credit does not indicate structural stress but a manageable funding mismatch. With credit expanding at roughly 12% versus deposit growth of about 10–11%, the divergence reflects tightening conditions in a fast-growing economy rather than systemic stress.
Public Sector Banks remain well positioned, with comfortable CD ratios of 74–76% and a sticky, low-cost deposit franchise anchored in rural and semi-urban India, strengthened by multiple differentiated levers.
We are reinforcing the liability side through new products, enhanced capabilities and digital-first CASA mobilisation. Policy support from the Government of India — including the ₹2,000 crore incentive allocation for RuPay and UPI in Budget 2026 — further improves deposit economics.
With ample liquidity buffers and stronger balance sheets, PSBs are equipped to fund India’s next phase of credit growth with prudence and confidence.
As the banking sector continues to evolve amid shifting customer expectations and technological disruption, what structural priorities do you believe will be most critical to sustaining stable, long-term growth—particularly across retail expansion, asset quality discipline, and digital competitiveness?
The customer will always remain at the centre of the Bank’s growth strategy. To meet and exceed customer expectations, technology plays a pivotal role, and banks are increasingly making adequate investments in developing robust in-house digital platforms while also collaborating with new-age digital start-ups.
At the same time, sustaining sequential growth in the retail portfolio while maintaining a high-quality asset book remains a key priority. The integration of technology across the entire value chain—from product development and customer sourcing to underwriting and ongoing portfolio monitoring—enables greater efficiency, accuracy, and risk control.
Accordingly, continuous investment in advanced technologies such as machine learning, data analytics tools, and generative AI, along with strategic partnerships with new-age technology players, will be a core principle driving the future growth and competitiveness of banks.
With new opportunities emerging in corporate financing, how should banks approach growth while maintaining capital discipline and a well-diversified credit portfolio? How does this align with the Bank’s overall credit strategy?
With new opportunities emerging in corporate financing, banks must pursue growth in a calibrated manner, ensuring capital discipline and a well-diversified credit portfolio. In line with the Government of India’s Viksit Bharat 2047 vision, the banking sector is strengthening its role in supporting long-term economic growth, infrastructure development, and industrial expansion.
Regulatory initiatives enabling merger and acquisition financing, large exposure norms, InvITs, and infrastructure financing have created a supportive framework for responsible corporate lending while preserving systemic stability.
At the same time, banks are balancing corporate growth with a continued focus on consumption-led sectors and MSME financing to ensure diversification and asset quality. Accordingly, the Bank’s credit strategy remains anchored in selective corporate exposure, granular retail and MSME growth, and disciplined capital allocation.
As AI-enabled solutions are increasingly deployed across areas such as underwriting, fraud monitoring, and customer service, could you share how Bank of Baroda is leveraging these initiatives to enhance efficiency, strengthen risk management, and improve customer experience?
At Bank of Baroda, AI plays a key role in transforming operations and strengthening customer engagement.
Bank of Baroda is among the early adopters of AI-driven solutions in the banking sector. With a strong focus on customer convenience, the Bank has deployed AI-based tools such as Aditi, a virtual relationship manager; “ADI”, an AI-enabled chatbot; and Gyan Sahay, a platform for capacity building of human resources. In addition, the bank’s wholly owned subsidiary, Baroda Sun Technologies, is developing multiple technology solutions leveraging AI and machine learning.
For risk management, the bank’s has implemented AI-ML based MuleHunter.ai for effective fraud risk management which operates in real time, monitoring transaction patterns and customer behaviour to detect and prevent suspicious activities, which is especially critical given the rapid growth in digital payments. Besides these, there are a number of other use cases, and the Bank is continuously focusing upon new areas.