E-Paper
PSBs write off ₹12 lakh crore since FY16, NPAs drop to 2.58%
Public sector banks wrote off over ₹12 lakh crore in loans since 2015-16, while their gross NPA ratio fell from 9.11% to 2.58% by March 2025.
Public sector banks (PSBs) have written off over ₹12 lakh crore worth of loans since 2015-16, even as they saw their gross non-performing asset (NPA) ratio plunged from 9.11% on March 31, 2021 to 2.58% on March 31, 2025, Union minister of state for finance Pankaj Chaudhary informed told Rajya Sabha on Tuesday.
The minister, however, clarified that these loans are written off from their respective balance sheets but banks’ recovery processes from defaulters continue unabated. “Such write-off does not result in waiver of liabilities of borrowers and therefore, it does not benefit the borrower. The borrowers continue to be liable for repayment and banks continue to pursue recovery actions initiated in these accounts,” he said in one of the written statements submitted to the house.
Recovery in written-off loans is an ongoing process and banks continue pursuing their recovery actions initiated against borrowers under the various recovery mechanism available to them, such as filing of a suit in civil courts or in debts recovery tribunals (DRTs), action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI), filing of cases in the National Company Law Tribunal under the Insolvency and Bankruptcy Code (IBC), he added.
In another statement he said, PSBs, however, saw a sharp decline in their gross non-performing assets (NPAs) that fell from ₹6.17 lakh crore in March 2021 to ₹2.84 lakh crore in March 2025 mainly because IBC that is empowered to remove nonpayers from the company’s management and bar wilful defaulters from participating in the resolution process.
Gross NPA ratio of public sector banks (PSBs) plunged 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 was consistent in 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. These measures include change in credit culture with IBC that fundamentally changed the creditor-borrower relationship, taking away control of the defaulting company 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 a surge in NPAs post an asset quality review that surfaced bad loans hidden in their books.
After the bank cleanup exercise was undertaken in 2015 -- starting with the RBI’s asset quality review (AQR) and followed by the government’s 4R’s strategy -- gross NPAs of PSBs fell sharply from a peak of ₹8.96 lakh crore on March 31, 2018, he said requesting anonymity.
The government’s decision to stop evergreening of bad loans lead to an AQR exercise in April 2025 leading to a spike in NPAs of PSBs from ₹2.17 lakh crore on March 31, 2014 to ₹8.96 lakh crore in March 2018 mainly due to indiscriminate lending in past decades. Detection followed the finance ministry’s 4R’s strategy – recognition, resolution, recapitalisation and reforms – to bring banks back in good health.
With the combined efforts of the government and the RBI, gross NPAs of scheduled commercial banks, including PSBs, fell to ₹4.55 lakh crore in December 2024 from the ₹10.36 lakh crore in 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 (about 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 make the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and the Recovery of Debt and Bankruptcy Act have also helped in 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.
