Consolidation and Growth: Decoding the RBI’s 2024-25 Trend & Progress Report on Banking in India

As we look back at 2025, the Indian financial ecosystem finds itself in a rare moment of equilibrium. The recently released Reserve Bank of India’s Report on Trend and Progress of Banking in India 2024-25 confirms that the Indian banking sector has transitioned from a phase of recovery to one of Mature Stability. With the Repo Rate settling at a growth-supportive 5.25% and asset quality at historic highs, Gross NPAs have plummeted to a multi-decadal low of 2.1%, and banks finally have the breathing room to look beyond balance sheet repair. The focus has shifted decisively toward the next frontier: building a payment infrastructure that is not just digital, but intelligent, interoperable, and scalable to charge the next phase of growth.

The data reveals a massive divergence between volume and value, a rising urgency in cybersecurity, and the definitive convergence of payments and lending. As we look toward 2026, understanding these shifts is critical for banks to remain competitive in a landscape where technology is the primary differentiator.

The Volume-Value Paradox: The Infrastructure Challenge

The most compelling data point from the 2024-25 report highlights a structural shift in how India transacts. While digital payment values grew by a healthy 17.9%, volumes surged by a massive 35%. This divergence has pushed the average ticket size of retail digital payments down from ₹4,382 in the previous year to ₹3,830 in 2024-25. This statistic confirms that digital payments have truly penetrated the micro-transaction layer of the economy. With digital modes now accounting for 97.6% of all payment values, leaving paper-based instruments with a mere 2.4% share, the pressure on banking infrastructure is unprecedented.

Legacy core banking systems, originally designed for high-value batch processing, are increasingly inefficient for processing millions of sub-₹100 transactions. The future belongs to banks that can decouple their payment processing layers from core ledgers, adopting cloud-native and microservices architectures that offer elasticity. To maintain profitability in a regime of compressing margins, banks must leverage technology to drastically reduce the cost-per-transaction, ensuring that the surge in volumes translates into diverse data insights rather than just operational overhead.

The Fortification of Trust: AI and Fraud Prevention

As payments become ubiquitous, the threat landscape has evolved with equal velocity. The RBI report notes that a staggering 66.8% of all reported frauds in 2024-25 were related to cards and the internet. This shift has necessitated a move from static security measures to dynamic, AI-driven surveillance. The regulator has responded proactively with the introduction of initiatives like MuleHunter.ai, which has already been implemented by 23 banks as of December 2025, and the broader Framework for Responsible and Ethical Enablement of AI (FREE-AI) released in August 2025.

For banks, the message is unambiguous: static Two-Factor Authentication (2FA) is becoming obsolete. The RBI’s directive on “principle-based authentication,” effective from April 1, 2026, mandates a shift toward more robust, dynamic verification methods. Fraud prevention is no longer a back-office compliance function; it is a front-line determinant of customer trust.

The Unified Lending Interface: Payments as the Gateway to Credit

Perhaps the most transformative development highlighted in the report is the rapid scaling of the Unified Lending Interface (ULI). Positioned as the next “UPI moment” for the credit sector, the ULI has already onboarded 64 lenders as of December 12, 2025. By integrating diverse data sources ranging from land records to satellite data, the ULI is streamlining credit appraisal and reducing turnaround times for MSME and rural borrowers.

This signals the final convergence of the payments and lending silos. With overall bank credit growing at 11.5% and NBFC credit surging by 19.4%, the appetite for capital is robust. However, the data suggests that banks must leverage their payment rails to feed directly into the ULI ecosystem. Payment history is evolving into the most reliable credit score for the new-to-credit population. Technology providers must now focus on API middleware that connects a bank’s transaction flows directly to credit decisioning engines, enabling “one-click credit” products that can compete with the agility of fintechs.

Regulatory Streamlining

Underpinning these technological shifts is a supportive policy environment focused on “Ease of Doing Business.” A significant administrative achievement noted in the report is the repeal of over 9,000 circulars, consolidated into just 244 Master Directions. This massive reduction in compliance complexity frees up management bandwidth and capital, allowing banks to redirect resources toward innovation and technology governance.

The Way Forward

As we step into 2026, the RBI Digital Payments Index (RBI-DPI) at 493.2 reflects an ecosystem that has matured in terms of access and infrastructure. The next phase of growth will be defined by depth rather than breadth. It will be characterized by the internationalization of UPI, the widespread adoption of Central Bank Digital Currency (CBDC), and the use of AI to hyper-personalize banking experiences. For financial institutions, the window to modernize is open, but the bar for execution has been raised.