If you keep your money in a bank or want to invest in bank shares or fixed deposits, it is good to know if the bank is strong and safe. In 2025, with many banks in India, checking if a bank is healthy is very important.
You don’t have to be an expert. Some easy-to-understand numbers, called financial ratios, can help you see if a bank is making profit, taking care of risks, and using money properly.
1. Capital Adequacy Ratio (CAR)
What it means:
This ratio tells how much safety money the bank has kept in case some people don’t return their loans. If this number is high, it means the bank can handle loss and still run properly. It is like keeping extra money in your pocket for emergency time. A bank with high CAR is safe and stable. the bank has if some people do not return their loans. If CAR is high, the bank is safe and can handle tough situations.
Formula:
CAR = (Tier 1 Capital + Tier 2 Capital) / Risk-Weighted Assets
Good to know:
- A CAR above 12% is good in 2025.
Open Demat Account and Start Trading!
2. Net Non-Performing Assets (Net NPA)
What it means:
This ratio shows how many people took loans from banks but are not returning it. If this number is high, it means the bank is losing money. Low NPA is a good sign. It means the bank is giving loans to people who are paying back on time. It tells how healthy the loan system of the bank is. from the bank but are not paying it back. Lower numbers are better. If NPA is high, it means the bank is not getting back its loan money.
Formula:
Net NPA = (Gross NPA – Provisions) / Total Loans
Good to know:
- A Net NPA below 2% is good.
3. Return on Assets (ROA)
What it means:
ROA tells how much profit the bank is earning from all the things it owns – like money, buildings, branches, and loans. If ROA is high, it means the bank is using its resources smartly and making good profit. It is a sign of a smart working bank. makes use of all its money and things. High ROA means the bank is working smart and earning well.
Formula:
ROA = Net Profit / Total Assets
Good to know:
- A ROA of 1% or more is good.
4. CASA Ratio (Current Account Savings Account Ratio)
What it means:
CASA ratio tells how much of the bank’s money is coming from savings and current accounts. These accounts give very low interest, so the bank gets money at low cost. If CASA is high, the bank can use that cheap money to earn more profit. It shows how much low-cost money bank is using. is getting from current and savings accounts. These accounts pay low interest, so the bank can use the money at low cost. More CASA is good.
Formula:
CASA Ratio = (Current Account + Savings Account Deposits) / Total Deposits
Good to know:
- A CASA ratio above 40% is strong.
5. Net Interest Margin (NIM)
What it means:
NIM shows the profit a bank earns from giving loans after it pays interest to people who keep money in the bank. If NIM is high, the bank is earning more on the money it lends. It shows how good the bank is in using deposit money for profit. is making by giving loans after paying interest to deposit holders. Higher NIM means better profit for the bank.
Formula:
NIM = (Interest Earned – Interest Paid) / Average Earning Assets
Good to know:
- A NIM above 2.5% is healthy.
6. Credit to Deposit Ratio (CD Ratio)
What it means:
This ratio shows how much of the money people have kept in the bank is being used to give loans. If the CD ratio is very high, the bank is taking more risk. If too low, the bank is not using the money well. A balanced CD ratio means the bank is lending properly. that the bank got as a deposit is being used to give loans. If the bank is using its money properly, this ratio is balanced.
Formula:
CD Ratio = Total Loans / Total Deposits
Good to know:
- A CD Ratio between 75% to 85% is safe.
7. Provision Coverage Ratio (PCR)
What it means:
This ratio tells how much money the bank has kept aside to cover bad loans. It is like keeping emergency savings for bad loans. If this number is high, the bank is ready for future loan losses. It shows how careful and prepared the bank is. has saved to cover bad loans. If PCR is high, it means the bank is ready for bad times. It is like keeping emergency money for loans that may not come back.
Formula:
PCR = Provisions / Gross NPA
Good to know:
- A PCR above 70% is good.
In 2025, you can check a bank’s health using simple numbers. These ratios – CAR, NPA, ROA, CASA, NIM, CD Ratio, and PCR – help you know if a bank is strong, making profit, and safe to keep your money.
You can find these numbers in the bank’s yearly report, RBI website, or financial news. Knowing them can help you make better decisions with your money.
If you want more help in understanding banks or choosing where to invest, Motilal Oswal is here for you. With expert advice and simple tools, you can make smart choices for your money. Whether it is savings, shares, or long-term plans – Motilal Oswal makes it easy for you.
Be aware. Stay safe. Choose banks that are strong and trustable for your hard-earned money.
Related Blogs - Current Ratio vs Quick Ratio | Ratios for Fundamental Research | Working of Ratios | 5 Ratios that help to Buy a Stock | PEG Ratio | Debt Equity Ratio