Lok Sabha Question No. 1434 (UNSTARRED), answered on 2026-02-09
Subject: Non-Performing Assets of Banks
Ministry: FINANCE
Asked by: Shri Prabhakar Reddy Vemireddy

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

## LOK SABHA UNSTARRED QUESTION NO- 1434

ANSWERED ON MONDAY, FEBRUARY 9, 2026/MAGHA 20, 1947 (SAKA)

## Non-Performing Assets of Banks

## 1434. SHRI PRABHAKAR REDDY VEMIREDDY:

Will the Minister of FINANCE be pleased to state:-

- (a)  whether  the  Government  is  aware  of  the  drastic  reduction  of  Non-Performing  Assets (NPAs) of banks to 2.1 percent in September, 2025, which as per RBI is lower than 2010-11 level;
- (b)  if  so,  the  details  thereof  along  with  the  status  of  NPAs  in  October,  November  and December, 2025 and January, 2026;
- (c) the extent to which the above figure helps banks to improve their asset quality;
- (d) whether it is true that in spite of registering 2.1 percent, NPAs of the Public Sector Banks (PSBs) is much higher than private banks and foreign banks; and
- (e)  if  so,  the  manner  in  which  Government  is  planning  to  bring  NPAs  of  PSBs  at  par  with private and foreign banks?

## ANSWER

## THE MINISTER OF STATE IN THE MINISTRY OF FINANCE (SHRI PANKAJ CHAUDHARY)

(a) to (e): The gross NPA ratio i.e. gross NPAs as a percentage of gross loans and advances of Scheduled Commercial Banks (SCBs), for domestic operations, has been continuously declining during  the  last  eight  financial  years,  and  were  at  a  historic  low  of  2.15%  as  at  the  end  of September, 2025 (provisional data), which is lower than 2010-11 level.

The Reserve Bank of India (RBI) initiated the Asset Quality Review (AQR) in 2015, post which the  Government  initiated 4R's  strategy  of recognising  NPAs  transparently,  resolving  and recovering  value  from  stressed  accounts  through  clean  and  effective  laws  and  processes, recapitalising PSBs, and reforms in banks and financial ecosystem to address the problem of rising NPAs and growing loan default. Enabled by these initiatives, a large drop in gross NPAs was achieved by PSBs.

RBI has apprised that the data on gross NPAs of SCBs is not collected by RBI on monthly basis.  However,  as  per  the  latest  data  available  with  RBI,  as  on  30.9.2025,  for  domestic operations, the gross NPA ratio of SCBs was 2.15%, PSBs was 2.50%, Private Sector Banks (PVBs) was 1.73% and Foreign Banks was 0.80%. Also, PSBs have a higher decline in gross NPA ratio in comparison with the PVBs and Foreign Banks since March, 2018.

This  continuous  decline  in  gross  NPAs  of  SCBs,  including  PSBs,  has  led  to  reduced provisioning by them, which in turn has improved their profitability thereby causing positive impact on the business growth. It also indicates that the asset quality as well as underwriting has improved in PSBs supported by a strong balance sheet and sustained profitability.

Comprehensive measures taken by the Government and RBI to prevent, reduce and recover NPAs.  Due  to  which  the  Slippage  Ratio, i.e. fresh  accretion  of  NPAs  as  a  percentage  of standard advances has been continuously improving for the last six financial years in respect of PSBs in comparison with PVBs. The slippage ratio in PSBs improved to 0.8% in September, 2025, which is lower than PVBs which stood at 1.8%. The measures taken include, inter alia , the following:

- (i) Under the PSB Reforms Agenda, comprehensive and automated Early Warning Systems (EWS) were instituted in PSBs, with approximately 80 EWS triggers and use of thirdparty  data  for  time-bound  remedial  actions  in  the  borrowing  accounts  to  proactively detect stress and in turn reducing slippage into NPAs.
- (ii) Moving from the 'Debtor in Possession' to a 'Creditor in Control' regime change in credit culture has been effected, with the Insolvency and Bankruptcy Code, 2016 (IBC) fundamentally  changing  the  creditor-borrower  relationship.  Behavioral  impact  of  IBC may be observed from the fact that as of March 2025, more than 30,000 applications having  underlying  default  of  Rs.  13.78  lakh  crore  have  been  settled  at  pre-admission stage itself.
- (iii) The Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest  Act,  2002  (SARFAESI)  and  the  Recovery  of  Debt  and  Bankruptcy  Act  have been  amended  to  make  it  more  effective.  Key  amendments  in  SARFAESI, inter  alia, Empowered RBI to audit and inspect Asset Reconstruction Companies (ARCs) and to impose penalties for non-compliance; mandated registration of all security interests with the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI); created additional DRTs to speed up case disposal; enabled non-institutional investors to invest in Security Receipts.
- (iv) Pecuniary  jurisdiction  of  DRTs  was  increased  from  Rs.  10  lakhs  to  Rs.  20  lakhs  to enable the DRTs to focus on high value cases resulting in higher recovery for the banks and financial institutions.
- (v) PSBs  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.
- (vi) Prudential Framework for resolution of stressed assets was issued by RBI on 7.6.2019 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.
- (vii) Government  and  RBI  have  been  working  in  coordination  to  strengthen  the  various recovery mechanisms available. These include filing of suits in civil courts or in Debts Recovery  Tribunals,  action  under  the  Securitisation  and  Reconstruction  of  Financial Assets  and  Enforcement  of  Security  Interest  Act,  filing  of  cases  in  the  National Company Law Tribunal under the Insolvency and Bankruptcy Code, through negotiated settlements/compromise,  and  through  sale  of  non-performing  assets.  In  addition  to these  to  address  the  delays  in  completion  of  CIRPs  various  amendments  have  been proposed in IBC that are under legislative approval.