English
English
English
Gross NPAs of Indian banks drop to a historic 2.15% in September 2025 due to RBI and government reforms, enhanced recovery frameworks, and improved asset quality, boosting bank profitability, balance sheets, and credit growth across PSBs and private banks.
Historic Decline in Gross NPAs
New Delhi: The gross non-performing assets (NPAs) of Scheduled Commercial Banks (SCBs) in India have reached a record low of 2.15% of total domestic loans and advances as of September 2025, according to provisional data.
This marks a significant improvement over levels observed in 2010–11 and reflects eight consecutive years of declining NPAs. Both public sector banks (PSBs) and private banks have contributed to this positive trend, with PSBs recording a notable reduction from 2018 onwards.
Several policy initiatives have played a crucial role in reducing NPAs. The Reserve Bank of India’s Asset Quality Review (AQR) launched in 2015 initiated a systematic evaluation of bank assets, prompting transparency and accountability.
Following this, the government implemented the 4Rs strategy—recognize, resolve, recapitalize, and reform—which included legal reforms, recapitalization of PSBs, and improvements in banking processes. These measures have helped banks recover value from stressed accounts and strengthened their balance sheets.
The decline in NPAs has had a direct impact on bank profitability. Reduced provisioning requirements have allowed banks to boost profits and expand credit. Improved asset quality and robust underwriting standards have reinforced confidence in PSBs, enabling them to sustain strong balance sheets and contribute positively to the overall growth of the banking sector.
The government and RBI have implemented multiple mechanisms to prevent and recover NPAs. These include Early Warning Systems (EWS) in PSBs, specialized stressed asset management verticals, and the shift from a “Debtor in Possession” to a “Creditor in Control” model under the Insolvency and Bankruptcy Code (IBC), 2016.
Legal frameworks such as SARFAESI and the Recovery of Debt and Bankruptcy Act have been strengthened to expedite recoveries, while DRTs’ pecuniary jurisdiction has been increased to focus on high-value cases.
These measures, along with prudential frameworks and innovative business models like the Feet-on-Street approach, have accelerated NPA resolution.
The slippage ratio, representing new NPAs as a percentage of standard advances, has steadily improved. For PSBs, the slippage ratio fell to 0.8% in September 2025, compared to 1.8% for private sector banks. These figures indicate that PSBs have been more effective in identifying and addressing stressed assets early, supported by reforms and continuous monitoring.
The historic low in gross NPAs reflects the combined impact of RBI oversight, government strategies, and legal reforms over the past decade. Improved asset quality, profitability, and recovery mechanisms have strengthened the Indian banking system, paving the way for sustainable credit growth and financial stability.
