New Delhi: The gross non-performing assets (NPA) ratio of scheduled commercial banks (SCBs) for domestic operations has declined steadily over the past eight financial years to a historic low of 2.15% as of end-September 2025 (provisional), falling below the level recorded in 2010-11, the government informed Parliament on Monday.
In a written reply to a question in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said the sustained improvement in asset quality followed the Reserve Bank of India’s asset quality review (AQR) initiated in 2015 and the subsequent implementation of the government’s 4R strategy — recognition of NPAs, resolution and recovery of stressed assets, recapitalisation of public sector banks (PSBs), and reforms in the banking and financial ecosystem.
According to the latest data available with the RBI, as on September 30, 2025, the gross NPA ratio stood at 2.15% for SCBs, 2.50% for PSBs, 1.73% for private sector banks, and 0.80% for foreign banks. The RBI has clarified that it does not collect gross NPA data on a monthly basis. The government noted that PSBs have recorded a sharper decline in gross NPA ratios compared to private and foreign banks since March 2018.
The continued decline in gross NPAs has led to lower provisioning requirements for banks, improving their profitability and positively impacting business growth. The trend also reflects improvement in asset quality and underwriting standards in PSBs, supported by stronger balance sheets and sustained profitability, the minister said.
The government further highlighted that fresh accretion of NPAs has moderated significantly. The slippage ratio — defined as fresh NPAs as a percentage of standard advances — has improved continuously over the past six financial years for PSBs and stood at 0.8% in September 2025, lower than the 1.8% recorded by private sector banks.
Govt-RBI Joint Effort
Several measures taken jointly by the government and the RBI were cited as contributing to the improvement in asset quality. Under the PSB reforms agenda, comprehensive and automated ‘early warning systems’ were implemented across public sector banks, incorporating around 80 triggers and third-party data to enable time-bound remedial action in borrowing accounts.
A shift in credit culture from a ‘debtor in possession’ to a ‘creditor in control’ regime was brought about through the Insolvency and Bankruptcy Code, 2016. The behavioural impact of the IBC is evident from the settlement of over 30,000 applications involving underlying defaults of Rs 13.78 lakh crore at the pre-admission stage as of March 2025.
The government said amendments to the SARFAESI Act and the Recovery of Debt and Bankruptcy Act have strengthened recovery mechanisms by empowering the RBI to audit and inspect asset reconstruction companies, mandating registration of security interests with CERSAI, enabling penalties for non-compliance, creating additional debt recovery tribunals (DRTs), and allowing non-institutional investors to invest in security receipts. The pecuniary jurisdiction of DRTs has also been increased from Rs 10 lakh to Rs 20 lakh to allow tribunals to focus on higher-value cases.
Public sector banks have established specialised stressed asset management verticals and branches for closer monitoring and faster resolution of NPA accounts. Measures such as deployment of business correspondents and adoption of a feet-on-street model have further strengthened recoveries. The RBI’s Prudential Framework for Resolution of Stressed Assets, issued on June 7, 2019, has facilitated early recognition, reporting and time-bound resolution of stress, with incentives for lenders to adopt resolution plans at an early stage.
The government added that recovery efforts continue through multiple channels, including civil courts, DRTs, SARFAESI actions, insolvency proceedings before the National Company Law Tribunal, negotiated settlements and sale of NPAs. Amendments to the IBC aimed at addressing delays in completion of corporate insolvency resolution processes are currently under legislative consideration.