The government has informed Parliament that the gross non-performing assets ratio of Scheduled Commercial Banks for domestic operations declined to a historic low of 2.15 per cent as of the end of September 2025 on a provisional basis, marking a continuous improvement over the last eight financial years and falling below the levels recorded in 2010-11.
In a written reply to a question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary stated that the decline has been supported by the Reserve Bank of India’s Asset Quality Review initiated in 2015, the government’s 4Rs strategy, and other reforms aimed at addressing rising NPAs and loan defaults.
According to the latest data available with the Reserve Bank of India as of 30 September 2025, the gross NPA ratio stood at 2.15 per cent for Scheduled Commercial Banks, 2.50 per cent for public sector banks, 1.73 per cent for private sector banks, and 0.80 per cent for foreign banks.
Public sector banks have recorded a sharper decline in gross NPAs compared with private and foreign lenders since March 2018.
The continuous fall in NPAs has reduced provisioning requirements for banks, improving profitability and supporting business growth.
It also reflects stronger asset quality and improved underwriting standards in public sector banks, backed by healthier balance sheets and sustained profitability.
The government and the Reserve Bank of India have undertaken comprehensive measures to prevent, reduce, and recover bad loans.
The slippage ratio, fresh accretion of NPAs as a percentage of standard advances, improved to 0.8 per cent for public sector banks in September 2025, lower than 1.8 per cent recorded by private sector banks.
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Among the key steps, public sector banks have implemented automated Early Warning Systems with around 80 triggers and third-party data to detect stress in borrowing accounts at an early stage.
The Insolvency and Bankruptcy Code has shifted the credit framework from a debtor in possession to a creditor in control regime.
As of March 2025, more than 30,000 applications involving underlying defaults of Rs 13.78 lakh crore were settled at the pre-admission stage, indicating a behavioural shift among borrowers.
Further reforms include amendments to the SARFAESI Act and the Recovery of Debt and Bankruptcy Act, the creation of additional Debt Recovery Tribunals, and an increase in the pecuniary jurisdiction of DRTs from Rs 10 lakhs to Rs 20 lakhs to focus on higher-value cases and improve recoveries.
Public sector banks have also established specialised stressed asset management verticals, adopted a feet-on-street recovery model, and leveraged business correspondents to accelerate recoveries.
Additionally, the Reserve Bank of India’s Prudential Framework for resolution of stressed assets issued on 7 June 2019 provides incentives for early recognition and time-bound resolution.
According to the minister, the government and the Reserve Bank of India have been working in coordination to strengthen recovery mechanisms, including filing of suits in civil courts or Debts Recovery Tribunals, action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy Code, negotiated settlements or compromise, and sale of non-performing assets.
In addition, to address delays in completion of Corporate Insolvency Resolution Processes, various amendments have been proposed in the Insolvency and Bankruptcy Code and are under legislative approval.
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