Historic Low in NPA Ratios Spurs Bank Profitability

The gross Non-Performing Assets (NPA) ratio of Scheduled Commercial Banks (SCBs) in India has reached a historic low of 2.15% as of September 2025, according to provisional data revealed by the Ministry of Finance. This figure marks a significant decline over the past eight financial years, even surpassing the 2010-2011 level, Minister Pankaj Chaudhary stated in Lok Sabha.

The Reserve Bank of India's Asset Quality Review (AQR) initiative, launched in 2015, along with the government's 4R's strategy, have played pivotal roles in this decline. This strategy involves recognizing NPAs transparently, resolving and recovering value from stressed accounts, recapitalizing Public Sector Banks (PSBs), and reforming banking systems to tackle rising NPAs and loan defaults.

Data from September 2025 indicates that the gross NPA ratio stands at 2.15% for SCBs in domestic operations, with PSBs at 2.50%, Private Sector Banks at 1.73%, and Foreign Banks at 0.80%. The decline in gross NPAs has reduced provisioning needs, bolstering profitability and growth in the banking sector. The improved asset quality underscores enhanced underwriting and strong financial health in PSBs.