As regards the religious condition, it is true that Buddhism was on the decline but it had its followers in Bengal and Bihar even up to the times of the Palas and Senas. The great Buddhist Academy of Vikramashila with its 107 temples and 6 colleges was established by Dharampal who ruled from 770 to 810 A.D. Jainism survived longer, particularly in the South.
In all the principal dynasties of the South, there were some patrons of Jainism. It flourished in the dominions of the Rashtrakutas, Chalukyas, Gangas and Hoyasalas till the rise of Vaishnavisrri and Saivism. Kumarila Bhatta, Sankaracharya, Ramanujacharya and Madhavacharya were the outstanding religious teachers who brought about a change in the spiritual outlook of Hindu Society. The revived Hinduism was a potent faith. Most of the rulers were followers of Hinduism but they were tolerant to all other religions. There was no religious persecution as such.
Vedic or Brahmin religion attained predominance. It was adopted not only by tribal’s and aboriginals but also by many foreigners. Many new Gods were adopted amongst which prominent ones were Lord Vishnu and Shiva. The new doctrine of incarnation also developed in the Hindu religion during this time. Shiva, Vishnu, Rama, Krishna and many other Gods were being worshipped as incarnations of God almighty.
So much so that Buddha also came to be counted as one of Lord’s incarnations. But the selfish priests and Brahmins again started encouraging many rituals which made the nature of the religion complicated. The immortality amongst the ruling and the priestly class was enough to take the country towards decline. Many Hindu philosophers criticized the caste system and the prerogatives enjoyed by the Brahmins e.g., the Nath Panthi followers of Gorakhnath.