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Banks’ Gross NPAs Improve To Historic Low Of 2.15%: MoS Finance Pankaj Chaudhary
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Gross NPAs of Scheduled Commercial Banks fell to a record low of 2.15% in Sep 2025, boosted by IBC and 4R reforms, improving profitability and assets.
Union Finance Minister Pankaj Chaudhary. (File Photo: PTI)
Gross non-performing assets (NPAs) of scheduled commercial banks (SCBs) for domestic operations declined to a historic low of 2.15% as of September 2025, said Minister of State for Finance Pankaj Chaudhary on February 9. He added that this continuous decline in gross NPAs of SCBs, including PSBs, has led to reduced provisioning by them, which has improved their profitability and business growth.
“The gross NPA ratio i.e. gross NPAs as a percentage of gross loans and advances of Scheduled Commercial Banks (SCBs), for domestic operations, has been continuously declining during the last eight financial years, and were at a historic low of 2.15% as at the end of September, 2025 (provisional data), which is lower than 2010-11 level,” Chaudhary said in reply to a query in the Lok Sabha
The Reserve Bank of India (RBI) initiated the Asset Quality Review (AQR) in 2015, post which the government initiated 4R’s strategy — recognising NPAs transparently, resolving and recovering value from stressed accounts through clean and effective laws and processes, recapitalising PSBs, and reforms in banks and financial ecosystem to address the problem of rising NPAs and growing loan default. Enabled by these initiatives, a large drop in gross NPAs was achieved by PSBs, according to a statement.
The RBI has apprised that the data on gross NPAs of SCBs is not collected by RBI on monthly basis. According to provisional data available with the RBI as of September 30, 2025, the gross NPA ratio stood at 2.50% for public sector banks (PSBs), 1.73% for private sector banks (PVBs), and 0.80% for foreign banks.
The government said PSBs have witnessed a sharper decline in NPAs compared with private and foreign banks since March 2018, underscoring the impact of targeted reforms in state-owned lenders.
“This continuous decline in gross NPAs of SCBs, including PSBs, has led to reduced provisioning by them, which in turn has improved their profitability thereby causing positive impact on the business growth. It also indicates that the asset quality as well as underwriting has improved in PSBs supported by a strong balance sheet and sustained profitability,” Chaudhary said.
Key legislative and regulatory changes cited include the enactment of the Insolvency and Bankruptcy Code (IBC), 2016, which marked a shift from a ‘debtor in possession’ to a ‘creditor in control’ framework.
The behavioural impact of the IBC is evident in early settlements. As of March 2025, over 30,000 cases involving underlying defaults of ₹13.78 lakh crore were settled at the pre-admission stage itself, the government said.
Slippages fall below private banks
Fresh accretion of NPAs, measured by the slippage ratio, has also improved significantly. The slippage ratio for PSBs declined to 0.8% in September 2025, compared with 1.8% for private sector banks, indicating stronger underwriting and monitoring standards in state-owned banks.
Lower NPAs have led to reduced provisioning, which has in turn improved profitability and supported credit growth, the government noted.
“This continuous decline in gross NPAs has strengthened bank balance sheets and improved asset quality, supported by sustained profitability,” the statement said.
Stronger recovery mechanisms
The government and RBI have implemented a range of recovery measures, including amendments to the SARFAESI Act, expansion of Debt Recovery Tribunals (DRTs), enhanced oversight of Asset Reconstruction Companies (ARCs), and mandatory registration of security interests with CERSAI.
Public sector banks have also set up specialised stressed asset management verticals, adopted automated Early Warning Systems (EWS) with nearly 80 triggers, and strengthened on-ground recovery efforts through dedicated follow-up mechanisms.
The government said it continues to work with the RBI to further strengthen recovery frameworks and address delays in insolvency resolution processes through proposed amendments to the IBC that are currently under legislative consideration.
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February 09, 2026, 17:44 IST
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