**Executive Summary**
This document presents the Ministry of Finance's response to Lok Sabha Unstarred Question No. 1434 regarding the reduction of Non-Performing Assets (NPAs) of banks. It acknowledges the decrease in gross NPA ratio to 2.15% as of September 30, 2025. The report also details measures taken by the government and RBI to manage and recover NPAs, highlighting improvements and providing comparative data across bank types.
**Key Points / Main Content**
* **NPA Reduction:**
* The gross NPA ratio of Scheduled Commercial Banks (SCBs) for domestic operations was 2.15% as of September 30, 2025, lower than 2010-11 levels.
* The gross NPA ratios for various bank types as of September 30, 2025, are: SCBs: 2.15%, Public Sector Banks (PSBs): 2.50%, Private Sector Banks (PVBs): 1.73%, Foreign Banks: 0.80%.
* PSBs have shown a higher decline in gross NPA ratio compared to PVBs and Foreign Banks since March 2018.
* **Government and RBI Measures:**
* The RBI initiated the Asset Quality Review (AQR) in 2015.
* The government initiated the 4R's strategy (recognizing NPAs, resolving and recovering value, recapitalizing PSBs, and reforms).
* Comprehensive Early Warning Systems (EWS) have been implemented in PSBs to proactively detect stress.
* Insolvency and Bankruptcy Code, 2016 (IBC) has fundamentally changed the creditor-borrower relationship. Over 30,000 applications settled at pre-admission stage as of March 2025.
* The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and the Recovery of Debt and Bankruptcy Act have been amended to be more effective.
* The pecuniary jurisdiction of Debt Recovery Tribunals (DRTs) was increased from Rs. 10 lakhs to Rs. 20 lakhs.
* PSBs have established specialized stressed asset management verticals.
* The RBI issued a Prudential Framework for resolution of stressed assets on 7.6.2019.
* The Government and RBI are coordinating to strengthen recovery mechanisms, including filing suits, actions under SARFAESI, and cases under IBC.
* **Impact on Banks:**
* The decline in NPAs has led to reduced provisioning, improved profitability, and positive impact on business growth for SCBs, including PSBs.
* Asset quality and underwriting have improved in PSBs.
**Impact Analysis**
**Key Stakeholder: Public Sector Banks (PSBs)**
* **Impact:** PSBs have experienced a reduction in NPAs, leading to improved financial performance and stability. The measures taken by the government and RBI directly affect their operational processes and risk management. PSBs are subject to the regulatory requirements regarding NPA recognition, reporting, and resolution.
* **Action Required:** PSBs must implement and adhere to the EWS, leverage the IBC framework, utilize specialized asset management verticals, and comply with the Prudential Framework for stressed asset resolution.
**Key Stakeholder: Reserve Bank of India (RBI)**
* **Impact:** The RBI is responsible for overseeing the implementation of various frameworks and regulations to manage NPAs. Its authority has been enhanced through amendments to SARFAESI, giving it greater oversight of ARCs.
* **Action Required:** The RBI needs to continue monitoring NPA levels, enforce regulatory compliance, and refine the existing frameworks to further improve NPA management.
**Key Stakeholder: Borrowers**
* **Impact:** Borrowers are subject to stricter credit culture due to IBC, promoting timely repayment and reducing defaults.
* **Action Required:** Borrowers need to manage their finances diligently to avoid becoming NPAs and face consequences under IBC.
**Key Stakeholder: Central Government**
* **Impact:** The Central Government has the ultimate responsibility to oversee the financial stability of the Public Sector Banks, and ensure that they can adequately contribute to the Indian economy.
* **Action Required:** Continue working in coordination with the RBI, to implement structural changes and legislative amendments, that address the issue of Non-Performing Assets.
Key Entities Referenced
Reserve Bank of India (RBI): Plays a key role in regulating banks and addressing non-performing assets (NPAs); initiated Asset Quality Review (AQR) and works with the Government on recovery mechanisms.
Non-Performing Assets (NPAs): The central subject of the document, specifically concerning the reduction and management of NPAs in banks.
Public Sector Banks (PSBs): Frequently mentioned in context to NPAs and various initiatives undertaken to manage their asset quality.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI): A key legal framework used for recovery of financial assets; amendments aim to make it more effective.
Insolvency and Bankruptcy Code, 2016 (IBC): A law that fundamentally changes the creditor-borrower relationship and has led to resolution of stressed accounts.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO- 1434
ANSWERED ON MONDAY, FEBRUARY 9, 2026/MAGHA 20, 1947 (SAKA)
Non-Performing Assets of Banks
1434. SHRI PRABHAKAR REDDY VEMIREDDY:
Will the Minister of FINANCE be pleased to state:-
(a) whether the Government is aware of the drastic reduction of Non-Performing Assets
(NPAs) of banks to 2.1 percent in September, 2025, which as per RBI is lower than 2010-11
level;
(b) if so, the details thereof along with the status of NPAs in October, November and
December, 2025 and January, 2026;
(c) the extent to which the above figure helps banks to improve their asset quality;
(d) whether it is true that in spite of registering 2.1 percent, NPAs of the Public Sector Banks
(PSBs) is much higher than private banks and foreign banks; and
(e) if so, the manner in which Government is planning to bring NPAs of PSBs at par with
private and foreign banks?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) to (e): The gross NPA ratio i.e. gross NPAs as a percentage of gross loans and advances of
Scheduled Commercial Banks (SCBs), for domestic operations, has been continuously declining
during the last eight financial years, and were at a historic low of 2.15% as at the end of
September, 2025 (provisional data), which is lower than 2010-11 level.
The Reserve Bank of India (RBI) initiated the Asset Quality Review (AQR) in 2015, post which
the Government initiated 4R’s strategy of recognising NPAs transparently, resolving and
recovering value from stressed accounts through clean and effective laws and processes,
recapitalising PSBs, and reforms in banks and financial ecosystem to address the problem of
rising NPAs and growing loan default. Enabled by these initiatives, a large drop in gross NPAs
was achieved by PSBs.
RBI has apprised that the data on gross NPAs of SCBs is not collected by RBI on monthly
basis. However, as per the latest data available with RBI, as on 30.9.2025, for domestic
operations, the gross NPA ratio of SCBs was 2.15%, PSBs was 2.50%, Private Sector Banks
(PVBs) was 1.73% and Foreign Banks was 0.80%. Also, PSBs have a higher decline in gross
NPA ratio in comparison with the PVBs and Foreign Banks since March, 2018.This continuous decline in gross NPAs of SCBs, including PSBs, has led to reduced
provisioning by them, which in turn has improved their profitability thereby causing positive
impact on the business growth. It also indicates that the asset quality as well as underwriting has
improved in PSBs supported by a strong balance sheet and sustained profitability.
Comprehensive measures taken by the Government and RBI to prevent, reduce and recover
NPAs. Due to which the Slippage Ratio, i.e. fresh accretion of NPAs as a percentage of
standard advances has been continuously improving for the last six financial years in respect of
PSBs in comparison with PVBs. The slippage ratio in PSBs improved to 0.8% in September,
2025, which is lower than PVBs which stood at 1.8%. The measures taken include, inter alia, the
following:
(i) Under the PSB Reforms Agenda, comprehensive and automated Early Warning Systems
(EWS) were instituted in PSBs, with approximately 80 EWS triggers and use of third-
party data for time-bound remedial actions in the borrowing accounts to proactively
detect stress and in turn reducing slippage into NPAs.
(ii) Moving from the 'Debtor in Possession' to a 'Creditor in Control’ regime change in
credit culture has been effected, with the Insolvency and Bankruptcy Code, 2016 (IBC)
fundamentally changing the creditor-borrower relationship. Behavioral impact of IBC
may be observed from the fact that as of March 2025, more than 30,000 applications
having underlying default of Rs. 13.78 lakh crore have been settled at pre-admission
stage itself.
(iii) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 (SARFAESI) and the Recovery of Debt and Bankruptcy Act have
been amended to make it more effective. Key amendments in SARFAESI, inter alia,
Empowered RBI to audit and inspect Asset Reconstruction Companies (ARCs) and to
impose penalties for non-compliance; mandated registration of all security interests with
the Central Registry of Securitisation Asset Reconstruction and Security Interest of India
(CERSAI); created additional DRTs to speed up case disposal; enabled non-institutional
investors to invest in Security Receipts.
(iv) Pecuniary jurisdiction of DRTs was increased from Rs. 10 lakhs to Rs. 20 lakhs to
enable the DRTs to focus on high value cases resulting in higher recovery for the banks
and financial institutions.
(v) PSBs have set-up specialized stressed assets management verticals and branches for
effective monitoring and focused follow-up of NPA accounts, which facilitates quicker
and improved resolution/ recoveries. Deployment of Business correspondents and
adoption of Feet-on-street model have also boosted the recovery trajectory of NPAs in
banks.
(vi) Prudential Framework for resolution of stressed assets was issued by RBI on 7.6.2019 to
provide a framework for early recognition, reporting and time bound resolution of
stressed assets, with a build-in incentive to lenders for early adoption of a resolution
plan.
(vii) Government and RBI have been working in coordination to strengthen the various
recovery mechanisms available. These include filing of suits in civil courts or in 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, through negotiated
settlements/compromise, and through sale of non-performing assets. In addition to
these to address the delays in completion of CIRPs various amendments have been
proposed in IBC that are under legislative approval.
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