How do you read Return on assets (ROA)?

For a bank, above 1% is good and above 1.5% is excellent. NBFCs, which hold more capital, run 2% to 3% or more. On the scale used here, below 0.7% reads as weak, 0.7% to 1.2% reads as decent, and 1.2% and above reads as strong. Higher is usually better.

Return on assets (ROA): meaning and how to read it

What is Return on assets (ROA)?

A lender's net profit as a share of everything on its balance sheet.

A bank earns a small profit on a very large balance sheet, so its returns look tiny beside a manufacturer's: 1 rupee of profit on 100 rupees of assets is a good result. ROA captures the whole chain in one number: the margin, less operating costs, less credit costs, less tax.

Return on equity is ROA multiplied by leverage. A bank with a 1% ROA and assets ten times its equity earns a 10% ROE. That is why ROA is the fairer comparison: it shows the earning power before the lender chose how much to borrow.

How it is calculated

ROA = net profit ÷ average total assets, as a percentage.

A worked example

A bank earns ₹1,300 Cr on average assets of ₹1,00,000 Cr: ROA = 1.3%.

Why does Return on assets (ROA) matter?

It is the cleanest measure of how profitable a lender is, because unlike ROE it cannot be raised simply by borrowing more.

What is a good Return on assets (ROA)?

For a bank, above 1% is good and above 1.5% is excellent. NBFCs, which hold more capital, run 2% to 3% or more.

Above 1% for a bank, with the strongest private banks near 2%. Because NBFCs and small finance banks carry less leverage and lend at higher rates, expect 2% to 4% from them. A ROA under 0.5% leaves little room for a bad year.

Reading scale

In %

Weak

Decent

Strong

0%0.7%1.2%2%+

On the scale used here, below 0.7% reads as weak, 0.7% to 1.2% reads as decent, and 1.2% and above reads as strong.

Higher is usually better.

What are the common mistakes with Return on assets (ROA)?

Comparing banks with NBFCs directly; their leverage differs.

Being impressed by a high ROE built on thin ROA and heavy leverage.

What is a typical Return on assets (ROA) in India today?

The median across the 982 listed companies that report it, as of 12 Oct 2026. Half sit above each figure and half below.

By company size

Median

Large Cap · 27 companies2.2%

Mid Cap · 33 companies2.2%

Small Cap · 922 companies1.6%

By industry

Median, largest industries first

Private Sector Bank · 201.2%

Public Sector Bank · 121.1%

Non Banking Financial Company (NBFC) · 733.0%

Investment Company · 450.8%

Asset Management Company · 927.3%

Holding Company · 133.5%

Stockbroking & Allied · 324.7%

Housing Finance Company · 143.1%

Financial Technology (Fintech) · 134.7%

Other Bank · 90.9%

Compare a company with its own industry before the whole market. Every industry, and each company's rank within it, is in the screener.

Is this lender sound, and does it earn enough for the risk it takes?

A bank's raw material is other people's money, so the ratios that judge a factory misread it. These are the figures that matter for banks, NBFCs and housing finance companies: what they earn on lending, how many loans have gone bad, how well they are cushioned against losses, and how cheaply they fund themselves.