Business EconomyPosted at: Feb 9 2026 5:08PM


Bank NPAs fall to 15-year low as asset quality improves; PSBs lead improvement

New Delhi, Feb 9 (UNI) The gross non-performing assets (GNPA) ratio of Scheduled Commercial Banks (SCBs) for domestic operations has declined continuously over the past eight financial years, reaching a historic low of 2.15% as of September 30, 2025, Minister of state for Finance Pankaj Chaudhary said on Monday.
This level is lower than that recorded in 2010–11, reflecting a sustained improvement in the asset quality of the banking system, as per the information shared by the Minister.
In a written reply to a question in Lok Sabha, Chaudhary highlighted that according to the latest data available with the Reserve Bank of India (RBI), as of end-September 2025, the GNPA ratio stood at 2.15% for SCBs, with Public Sector Banks (PSBs) at 2.50%, Private Sector Banks (PVBs) at 1.73%, and Foreign Banks at 0.80%. The RBI has clarified that GNPA data is not collected monthly.
Notably, PSBs have recorded a sharper decline in GNPA ratios compared to private and foreign banks since March 2018.
The improvement follows the Asset Quality Review (AQR) initiated by the RBI in 2015, after which the Government launched a comprehensive “4R” strategy - recognition of NPAs in a transparent manner, resolution and recovery of stressed assets through effective legal processes, recapitalisation of PSBs, and reforms in the banking and financial ecosystem.
These measures have contributed significantly to the reduction of stressed assets, particularly in public sector banks.
The sustained decline in NPAs has led to lower provisioning requirements for banks, thereby improving profitability and supporting business growth. It also indicates strengthening underwriting standards and better asset quality management in PSBs, backed by stronger balance sheets and consistent profitability.
Further, the slippage ratio, fresh accretion of NPAs as a percentage of standard advances, has shown continuous improvement over the last six financial years. As of September 2025, the slippage ratio for PSBs declined to 0.8%, compared with 1.8% for private sector banks.
The Government and the RBI have implemented several measures to prevent, reduce, and recover NPAs.
These include the introduction of comprehensive and automated Early Warning Systems (EWS) in PSBs with around 80 triggers to proactively identify stress in borrower accounts. Structural reforms in credit culture were also undertaken through the Insolvency and Bankruptcy Code (IBC), 2016, shifting the framework from a “debtor in possession” to a “creditor in control” regime. As of March 2025, over 30,000 cases involving defaults of ₹13.78 lakh crore were settled at the pre-admission stage under the IBC.
Additionally, amendments to the SARFAESI Act and the Recovery of Debt and Bankruptcy Act have strengthened enforcement and recovery mechanisms.
These include enhanced regulatory powers for the RBI over Asset Reconstruction Companies, mandatory registration of security interests with CERSAI, expansion of Debts Recovery Tribunals (DRTs), and higher pecuniary jurisdiction limits to focus on high-value cases.
PSBs have also established specialised stressed asset management verticals and branches, alongside deploying business correspondents and adopting a “feet-on-street” recovery model to accelerate recoveries.
The RBI’s Prudential Framework for Resolution of Stressed Assets, issued in June 2019, has further supported early recognition and time-bound resolution of stressed accounts.
The Government and RBI continue to work jointly to strengthen recovery channels, including insolvency proceedings, SARFAESI actions, negotiated settlements, and asset sales, while legislative amendments to address delays in insolvency resolution processes are under consideration. UNI VK SAS SSP
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