Primarily the theme of in/sanity is achieved through the first person narration of Frank Cauldhame, and how human and sane his character is presented through his narration, even though the kind of practices that he engages in belie his apparent sanity. Note the way in which his voice is detached and calm--even when he describes the most grotesque and violent practices he still maintains this distinct voice.
In addition, something else that leads us to believe that his perspective is that of a sane person is the way in which he is able to have an objective view of his life and combines irony and humour in his narrative account. At times, he is even able to show self-analysis, which is something that we would definitely not associate with a narrative of somebody who is insane. Banks therefore explicitly addresses the boundary line between sanity and insanity through the first-person narrative of Frank Cauldhame, and in particular through the way that he muddies the waters between these two discrete states to show how in some ways, Frank is actually more sane than we would otherwise imagine or suspect.