NEW DELHI: Public sector banks saw a sharp decline in their gross non-performing assets (NPAs) from ₹6.17 lakh crore in March 2021 to ₹2.84 lakh crore in March 2025 mainly because the Insolvency and Bankruptcy Code (IBC) that could remove nonpayers from the company’s management and bar wilful defaulters from participating in the resolution process, minister of state for finance Pankaj Chaudhary said.
Gross NPA ratio of public sector banks (PSBs) dropped from 9.11% on March 31, 2021 to 2.58% on March 31, 2025, he told the Rajya Sabha on Tuesday.
Gross non-performing asset ratio is the proportion of PSB’s gross NPAs to their total advances in a particular year.
According to the minister, the decline has been consistent over the last four years. On March 31, 2022, the GNPA ratio fell to 7.28% at ₹5.41 lakh crore. It dropped further to 4.97% at ₹4.28 lakh crore on March 31, 2023, and 3.47% to ₹3.39 lakh crore on March 31, 2024.
“Comprehensive measures have been taken by the Government and the Reserve Bank of India (RBI) to recover and reduce NPAs,” Chaudhary said in a written response. These measures include a change in credit culture with the IBC, which fundamentally altered the creditor-borrower relationship by taking control of the defaulting company away from promoters and debarring wilful defaulters from the resolution process, he said.
A finance ministry official said that early detection of potential defaults has also helped in lowering fresh accretion of NPAs by BSBs to below 1% of their standard advances compared to 8.35% in March 2018, the period that saw a surge in NPAs post an asset quality review that brought out bad loans hidden in their books.
{{/usCountry}}A finance ministry official said that early detection of potential defaults has also helped in lowering fresh accretion of NPAs by BSBs to below 1% of their standard advances compared to 8.35% in March 2018, the period that saw a surge in NPAs post an asset quality review that brought out bad loans hidden in their books.
{{/usCountry}}After the bank cleanup exercise was undertaken in 2015, gross NPAs of PSBs fell sharply from a peak of ₹8.96 lakh crore on March 31, 2018, he said on condition of anonymity.
The government’s decision to stop evergreening of bad loans led to an asset quality review exercise in April 2025, triggering a spike in NPAs of PSBs from ₹2.17 lakh crore on March 31, 2014, to ₹8.96 lakh crore in March 2018.
With the combined efforts of the government and the RBI, the gross NPAs of scheduled commercial banks, including PSBs, fell to ₹4.55 lakh crore in December 2024, from ₹10.36 lakh crore as of March 31, 2018, the official said, quoting government data.
Enactment of stringent laws such as IBC in 2016 helped in this, he said.
So far, IBC has rescued 3,171 distressed companies involving 1,119 cases, recovering about ₹3.6 lakh crore as on December 31, 2024 (over eight years) as compared to the erstwhile Board of Industrial and Financial Reconstruction (BIFR) regime that resolved less than 3,500 cases in about three decades since its inception in 1987.
Chaudhary said the government’s efforts to implement the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002, and the Recovery of Debts and Bankruptcy Act have also helped in the faster recovery of bad loans. “Pecuniary jurisdiction of Debt Recovery Tribunal (DRTs) was increased from ₹10 lakhs to ₹20 lakhs to enable the DRTs to focus on high value cases resulting in higher recovery for the banks and financial institutions,” he said.
PSBs have set up specialised stressed assets management verticals and branches for effective monitoring and focused follow-up of NPA accounts, which facilitates quicker and improved resolution and recoveries, he said.
“Deployment of Business Correspondents and adoption of feet-on-street model have also boosted the recovery trajectory of NPAs in banks,” he added.