India’s gross non-performing assets (GNPA) ratio has declined sharply from a peak of 14.58 per cent in March 2018 to 2.30 per cent as of September 2025, signalling a significant strengthening of the country’s banking sector balance sheets, the government informed Parliament.
The data was provided in a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha in response to a question on loan write-offs and recovery mechanisms.
According to the statement, the reduction in bad loans reflects sustained efforts by the Reserve Bank of India and the government to improve credit discipline and accelerate the resolution of stressed assets. Comprehensive measures have been implemented to enhance the effectiveness, efficiency, and timeliness of recovery frameworks across the banking system.
A key structural reform highlighted in the reply is the Insolvency and Bankruptcy Code (IBC), which has “fundamentally” altered the creditor-borrower relationship by enabling lenders to take control of defaulting companies from promoters and barring wilful defaulters from the resolution process. Personal guarantors to corporate debtors have also been brought under its ambit to strengthen recoveries.
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The government further noted that amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and the Recovery of Debt and Bankruptcy Act have improved enforcement capabilities.
Additionally, the pecuniary jurisdiction of Debt Recovery Tribunals (DRTs) has been raised from ₹10 lakh to ₹20 lakh, allowing tribunals to focus on higher-value cases and improve recovery outcomes.
Public sector banks have also established specialised stressed asset management verticals for closer monitoring of non-performing accounts, while the deployment of business correspondents and a “feet-on-street” approach has supported faster resolution.
Despite improved profitability and declining GNPAs, the government observed that the occurrence of NPAs remains a normal, though undesirable, corollary of banking operations.
Factors such as macroeconomic conditions, sectoral stress, aggressive lending during economic upturns, delayed recognition of financial stress, poor credit underwriting, and project implementation challenges continue to influence asset quality.
To prevent future stress cycles, the RBI has issued a prudential framework that emphasises early recognition, reporting, and time-bound resolution of distressed assets, supported by incentives for lenders to adopt resolution plans promptly.
Banks’ boards have also been entrusted with ensuring robust credit risk management systems covering pre-sanction appraisal, post-sanction monitoring, and sectoral exposure controls.
Further, under board-approved staff accountability policies, action is taken against officials responsible for lapses in due diligence, non-compliance with procedures, or misconduct linked to credit decisions, reinforcing governance standards within the banking sector.
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