India’s banking success story does not show the complete picture

An incomplete picture is being circulated by some about how Indian banks have never been healthier.

- It is true in a way. Banks' gross bad loans have fallen to 1.8% by March 2026. A multi-decade low.

- Public sector banks, once the epicentre of every default scandal, are down to 2.6%. Private banks sit at 1.8%.

Here is the thing. Risk does not disappear. It moves.

A huge amount of corporate funding and debt is now also coming from instruments beyond bank loans - which was not the case in India even 5 years ago.

The scale is not small anymore.

- Private credit funds deployed a record $12.4 billion in 2025 alone, across 166 deals.

- Real estate soaked up 42% of that money in the second half of the year.

And, most important of all, the biggest deals do most of the work. Transactions above $100 million were just 9% of the count but 80% of the value.

So the banking system looks pristine. But the risky lending never stopped. It was disintermediated, pushed out of deposit-taking banks and into funds backed by family offices and wealthy individuals.

And, to be clear, that is not automatically bad. Specialised risk capital should sit with specialised risk-takers, not with your savings account.

But we should be honest about what the 1.8% is really telling us.

It measures the health of the banking system. It does not measure the health of Indian corporate credit.

Those two things used to be the same. They are not anymore.

A bank reports to the RBI every quarter. But, an AIF does not publish a bad-loan ratio the way a bank does.

So when stress builds inside private credit, there is no clean number flashing red for the rest of us to see.

The point: ALWAYS LOOK AT THE FULL PICTURE.

This is so important.