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India’s Gross NPAs Drop to 2.58% in FY25 from 9.11% in FY21 Amid Major Banking Reforms

India has achieved a significant milestone in strengthening its banking sector. The gross Non-Performing Assets (NPAs) of public sector banks (PSBs) have dropped sharply from 9.11% in March 2021 to 2.58% by the end of March 2025, as per data released by the Reserve Bank of India (RBI).

by Economy India
July 23, 2025
Reading Time: 3 mins read
NPA reduction, RBI reforms, public sector banks, IBC, SARFAESI, Indian banking sector, asset recovery, financial reforms India, Pankaj Chaudhary

NPA reduction, RBI reforms, public sector banks, IBC, SARFAESI, Indian banking sector, asset recovery, financial reforms India, Pankaj Chaudhary

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Structural and institutional reforms, including IBC, DRT revamp, and RBI’s prudential measures, have led to a sharp decline in public sector banks’ NPAs over the past five years.


New Delhi (Economy India): India has achieved a significant milestone in strengthening its banking sector. The gross Non-Performing Assets (NPAs) of public sector banks (PSBs) have dropped sharply from 9.11% in March 2021 to 2.58% by the end of March 2025, as per data released by the Reserve Bank of India (RBI). This remarkable turnaround is attributed to a wide range of reforms and recovery-focused measures undertaken by the government and RBI.

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India's Gross NPAs Drop to 2.58% in FY25 from 9.11% in FY21 Amid Major Banking Reforms
India’s Gross NPAs Drop to 2.58% in FY25 from 9.11% in FY21 Amid Major Banking Reforms

The year-wise gross NPAs and their ratios are as follows:

DateGross NPAs (₹ Crore)NPA Ratio (%)
31-Mar-20216,16,6169.11
31-Mar-20225,40,9587.28
31-Mar-20234,28,1974.97
31-Mar-20243,39,5413.47
31-Mar-20252,83,6502.58
India's Gross NPAs Drop to 2.58% in FY25 from 9.11% in FY21 Amid Major Banking Reforms
India’s Gross NPAs Drop to 2.58% in FY25 from 9.11% in FY21 Amid Major Banking Reforms

Government-RBI Initiatives Driving NPA Reduction

The sharp fall in NPAs stems from sweeping structural and institutional changes aimed at enhancing recovery mechanisms and tightening lending discipline.

  1. IBC Revolutionized Recovery Framework:
    The Insolvency and Bankruptcy Code (IBC) has fundamentally altered debtor-creditor dynamics by empowering creditors, disqualifying wilful defaulters from the resolution process, and bringing personal guarantors under the code’s ambit.
  2. Legal Amendments Strengthen Enforcement:
    Acts like the SARFAESI Act, 2002, and the Recovery of Debts and Bankruptcy Act have been amended to strengthen enforcement and asset recovery. DRT’s jurisdiction threshold was raised from ₹10 lakh to ₹20 lakh to prioritize high-value recovery cases.
  3. Special Recovery Units in Banks:
    PSBs have created dedicated stressed asset recovery cells and branches to streamline monitoring and resolution. Business correspondents and the “feet-on-street” model have boosted grassroots-level follow-ups.
  4. Prudential Framework for Early Resolution:
    RBI issued guidelines mandating early recognition, reporting, and resolution of stressed assets through a defined framework. Timely adoption of resolution plans has also been incentivized.
  5. Independent Asset Valuation Mandates:
    Banks must now follow board-approved policies for independent asset valuations before sanctioning large loans or selling collateral under the SARFAESI Act. Properties above ₹50 crore require two independent valuations, and e-auctions are encouraged for transparent asset disposal.
  6. Safeguards Against Inflated Valuation:
    RBI’s guidelines empower banks to seek clarifications from valuers suspected of inflating asset prices and to report them to the Indian Banks’ Association (IBA).
  7. Joint Lender Forums & Panel Valuations:
    Under RBI’s 2015 master circular, collateral valuations must be reviewed every three years by empanelled professionals. Joint Lender Forums (JLFs) also ensure a unified and timely recovery approach.

Minister’s Statement in Parliament

Minister of State for Finance, Shri Pankaj Chaudhary, shared this data and reform overview in a written reply in the Rajya Sabha today, underscoring the success of the government’s and RBI’s coordinated efforts to clean up the banking sector.



India’s Gross NPAs Drop to 2.58% in FY25 | NPA Recovery Reforms

(Economy India)

Source: Economy India
Tags: asset recoveryfinancial reforms IndiaIBCIndian Banking SectorNPA reductionPankaj ChaudharyPublic Sector BanksRBI reformsSARFAESI
Economy India

Economy India

Economy India is one of the largest media on the Indian economy. It provides updates on economy, business and corporates and allied affairs of the Indian economy. It features news, views, interviews, articles on various subject matters related to the economy and business world.

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