NPA
Banking Sector Revival as India Records Historic Low NPAs: India’s banking system has entered a phase of renewed strength as gross Non-Performing Assets (NPAs) of scheduled commercial banks declined to a historic 2.15% in September 2025. The data was presented in Parliament on February 9, 2026, marking the lowest NPA level in over a decade. This figure is even lower than the pre-stress levels of 2010–11, signaling a decisive turnaround.
The achievement reflects sustained regulatory reforms, improved credit discipline, and systematic resolution of stressed assets. Lower NPAs directly enhance banks’ profitability and lending capacity.
Understanding NPAs and Their Impact
A Non-Performing Asset (NPA) is a loan where interest or principal remains overdue for more than 90 days. High NPAs reduce bank profitability, increase provisioning requirements, and limit fresh lending.
The fall to 2.15% indicates improved asset quality and effective risk assessment practices. It also enhances investor confidence and strengthens financial stability.
Static GK fact: The Reserve Bank of India (RBI) was established in 1935 under the RBI Act, 1934, and serves as the central banking authority regulating India’s monetary and banking system.
Performance Across Bank Categories
As per RBI data for domestic operations till September 30, 2025, Public Sector Banks (PSBs) recorded a gross NPA ratio of 2.50%, while private sector banks stood at 1.73%. Foreign banks operating in India reported the lowest at 0.8%.
Notably, PSBs have shown sharper improvement since March 2018, significantly narrowing the gap with private banks. This reflects structural reforms and better governance practices in state-owned banks.
Public Sector Banks Lead Recovery
PSBs underwent balance sheet clean-ups, recapitalisation drives, and governance reforms over the past decade. Improved profitability and capital adequacy strengthened their credit appraisal systems.
Lower NPAs reduced provisioning burdens, enabling higher net profits and improved lending potential. This strengthened their role in financing infrastructure and MSMEs.
Static GK Tip: Public Sector Banks account for nearly two-thirds of India’s total banking assets, making their performance crucial for economic stability.
RBI Reforms and the 4R Strategy
The turning point came after the RBI’s Asset Quality Review (AQR) in 2015, which mandated transparent recognition of stressed assets. This ended the practice of loan evergreening.
The government complemented this with the 4R strategy — Recognition, Resolution, Recapitalisation, and Reforms. These measures ensured systemic correction rather than temporary relief.
Recovery Mechanisms Strengthened
Banks used recovery channels such as the Insolvency and Bankruptcy Code (IBC), 2016, the SARFAESI Act, 2002, and Debts Recovery Tribunals (DRTs). Proceedings under the National Company Law Tribunal (NCLT) accelerated corporate insolvency resolution.
Proposed amendments to IBC aim to further expedite Corporate Insolvency Resolution Processes (CIRPs).
Static GK fact: The Insolvency and Bankruptcy Code, 2016 consolidated multiple insolvency laws into a single framework for time-bound resolution.
Slippage Ratio and Future Stability
The slippage ratio, which measures fresh additions to NPAs, has steadily improved over the past six years. This indicates better credit monitoring and risk management.
Sustained regulatory vigilance, capital strength, and improved borrower discipline collectively point toward long-term financial stability in India’s banking sector.
Static Usthadian Current Affairs Table
Banking Sector Revival as India Records Historic Low NPAs:
| Topic | Detail |
| Gross NPAs | Declined to 2.15% by September 2025 |
| PSB Gross NPA | 2.50% |
| Private Bank Gross NPA | 1.73% |
| Foreign Bank Gross NPA | 0.8% |
| Reform Trigger | RBI Asset Quality Review 2015 |
| Government Strategy | 4R strategy |
| Key Recovery Law | Insolvency and Bankruptcy Code 2016 |
| Slippage Trend | Consistent improvement over six years |
