The gross non‑performing asset (NPA) ratio of India’s public sector banks declined sharply from 9.11% in March 2021 to 2.58% as of March 31, 2025, according to data submitted to Parliament by the Ministry of Finance.
🔍 What Drove the Decline?
- Legal & Regulatory Reforms
The rollout and enforcement of the Insolvency & Bankruptcy Code (IBC), updates to the SARFAESI Act, and an increase in the jurisdiction of Debt Recovery Tribunals helped expedite the resolution of distressed assets. - Proactive Bank Measures
PSBs set up specialized recovery units, employed field officers (“feet-on-street” model), and pushed for early default recognition, significantly boosting recovery rate - Large-Scale Loan Write-Offs
Since 2015–16, PSBs wrote off over ₹12 lakh crore of non-performing loans, yet pursued recoveries, contributing directly to balance sheet cleanups.
📊 Five-Year NPA Trend
| As of March 31 | Gross NPAs (₹ trillion) | Gross NPA Ratio (%) |
|---|---|---|
| 2021 | 6.16 | 9.11 |
| 2022 | 5.41 | 7.28 |
| 2023 | 4.28 | 4.97 |
| 2024 | 3.39 | 3.47 |
| 2025 | 2.84 | 2.58 |
(Data sourced from RBI provisional data and Ministry of Finance replies)
🧭 What This Means for the Banking Sector
- Improved Asset Quality: Gross NPAs are now near multi-decade lows, reversing recent stress from the pandemic era.
- Stronger Capital Buffers: Robust recovery helped maintain high capital adequacy ratios and liquidity, reinforcing systemic resilience.
- Ongoing Vigilance: Though NPAs are low, RBI stress tests predict possible rises to ~2.5% by 2027 under baseline scenarios, and higher under adverse conditions. Reuters
