New Delhi: The government on Tuesday said that the gross non-performing assets (NPA) ratio of public sector banks (PSBs) has declined from 9.11% in March 2021 to 2.58% in March 2025, marking a consistent improvement over the past five financial years.
In a written reply to a question in the Rajya Sabha, minister of state for finance Pankaj Chaudhary said gross NPAs of PSBs stood at ₹6.16 trillion as of 31 March, 2021, and have since dropped by more than half to ₹2.83 trillion as of 31 March, based on provisional RBI data.
Chaudhary attributed this sharp reduction to comprehensive measures taken by the government and the Reserve Bank of India (RBI) to reduce and recover NPAs.
He said the Insolvency and Bankruptcy Code (IBC) has transformed the credit landscape by altering the creditor-borrower relationship, stripping defaulting promoters of control and barring wilful defaulters from resolution processes. Personal guarantors to corporate debtors have also been brought under the IBC’s ambit to tighten the enforcement process.
Choudhary said the government has amended the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, and the Recovery of Debt and Bankruptcy Act, increasing the pecuniary jurisdiction of Debt Recovery Tribunals (DRTs) to focus on high-value cases, resulting in higher recovery.
Public sector banks have set up specialised stressed assets management verticals and branches for effective monitoring. Deployment of business correspondents and adoption of the feet-on-street model have also boosted the recovery trajectory of NPAs in banks.
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.
The minister also outlined RBI-mandated practices around asset valuation. Banks are required to follow board-approved policies for property valuation, conducted by independent, qualified valuers. For assets worth ₹50 crore or more, at least two independent valuation reports must be obtained to ensure transparency.
As per RBI’s master circular on Income Recognition, Asset Classification and Provisioning (IRAC) norms (dated 1 July 2015), immovable properties held as collateral must be revalued once every three years. Additionally, under the Joint Lenders’ Forum (JLF) guidelines issued in 2014, banks can seek explanations from valuers who overstate security values and report such instances to the Indian Banks’ Association.
