India's banking sector demonstrated strengthened profitability and improved asset quality in FY25, with Gross Non-Performing Assets (GNPA) falling to a multi-decade low of 2.2%. Banks actively sold stressed assets to Asset Reconstruction Companies (ARCs), particularly private and foreign banks. Non-banking financial companies (NBFCs) and Housing Finance Companies (HFCs) also reported growth and improved profitability, though NBFC net profit saw a slight moderation.