Lok Sabha Question No. 1676 (UNSTARRED), answered on 2025-03-10
Subject: Measures to Reduce the NPAs in Indian Banking System
Ministry: FINANCE
Asked by: Shri P V Midhun Reddy

## GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF FINANCIAL SERVICES

## LOK SABHA UNSTARRED QUESTION NO-1676

ANSWERED ON MONDAY, MARCH 10, 2025/PHALGUNA 19, 1946 (SAKA)

## MEASURES TO REDUCE THE NPAs IN INDIAN BANKING SYSTEM

## 1676. SHRI P V MIDHUN REDDY

Will the Minister of FINANCE be pleased to state:-

(a) the measures taken by the Government to reduce the pending Non-Performing Assets (NPAs) in the Indian Banking System;

- (b) the progress made so far under the same and the benefits realised so far; and

(c)  the  details  of  progress  made  with  respect  to  implementation  of  Mission  Indradhanush  for PSBs?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE

## (SHRI PANKAJ CHAUDHARY)

(a) and (b): Comprehensive measures have been taken by the Government and the Reserve Bank of  India  (RBI)  to  recover  and  to  reduce  NPAs,  enabled  by  which,  gross  non-performing  assets (NPAs) of scheduled commercial banks have declined to Rs. 4,55,278 crore (gross NPA ratio of 2.42%) in December 2024 (RBI provisional data) from a peak of Rs. 10,36,187 crore (gross NPA ratio of 11.18%) in March 2018. These measures include, inter alia , the following:

- (1) Change in credit culture has been effected, with the Insolvency and Bankruptcy Code (IBC) fundamentally  changing  the  creditor-borrower  relationship,  taking  away  control  of  the defaulting  company  from  promoters/owners,  and  debarring  wilful  defaulters  from  the resolution  process.  To  make  the  process  more  stringent,  personal  guarantor  to  corporate debtor has also been brought under the ambit of IBC.
- (2) The  Securitisation  and  Reconstruction  of  Financial  Assets  and  Enforcement  of  Security Interest  Act,  2002  and  the  Recovery  of  Debt  and  Bankruptcy  Act  have  been  amended  to make it more effective.
- (3) Pecuniary jurisdiction of Debt Recovery Tribunal (DRTs) was increased from Rs. 10 lakh to Rs. 20 lakh to enable the DRTs to focus on high value cases resulting in higher recovery for the banks and financial institutions.
- (4) Public  Sector  Banks  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.
- (5) Prudential  Framework  for  resolution  of  stressed  assets  was  issued  by  RBI  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.

(c): Government launched 'Indradhanush' scheme in August 2015 for comprehensive framework to revamp and improve Public Sector Banks (PSBs), and had implemented structural and policy changes, which include inter alia , the following:

- (1) Financial Services Institutions Bureau (erstwhile Bank Board Bureau established in 2016) has been constituted for arm's length selection of top management in PSBs.
- (2) The post of Chairman and Managing Director has been separated into posts of MD & CEO and non-executive chairman to ensure appropriate checks and balances.
- (3) Capital infusion has been done in banks to supplement the achievement of regulatory capital norms  by  PSBs  through  their  own  efforts  and,  in  addition,  based  on  performance  and potential, augmenting their growth capital.
- (4) The Government has issued a circular for non- interference from Government and banks to take  their  decision  independently  keeping  the  commercial  interest  of  the  organisation  in mind.
- (5) Revised framework of Key Performance Indicators (KPIs) for whole time directors has been introduced, and
- (6) Banking  reforms,  including  EASE  reforms,  have  been  initiated  to  address  various  issue, which  include, inter alia credit  discipline,  strengthening  of  risk  management  practices, responsible  lending,  improved  governance,  adoption  of  technology,  enabling  customer centricity and supporting financial inclusion.

As  a  result  of  Indradhanush  Scheme  and  other  reforms  implemented  by  the  government, performance of PSBs has significantly improved with -

- (i) gross  NPAs  of  PSBs  declining  to  Rs.  3.02  lakh  crore  (gross  NPA  ratio  of  2.85%)  in December 2024 (provisional data) from a peak of Rs. 8.96 lakh crore (gross NPA ratio of 14.58%) in March 2018;
- (ii) slippage ratio declining to 0.95% from 8.35% during the said period;
- (iii) Capital  adequacy  ratio  improving  to  14.84%  in  December  2024  (provisional  data)  from 11.66% in March 2018;
- (iv) Provision  coverage  ratio  improving  to  93.01%  in  December  2024  (provisional  data)  from 62.71% in March 2018; and
- (v) PSBs recording highest ever aggregate net profit of Rs. 1.41 lakh crore in FY 2023-24 and Rs. 1.30 lakh crore up to December 2024 (provisional data) of the current financial year.

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