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India’s Gross NPAs Fall to Multi-Decade Low of 2.1 percent, RBI Report Shows

December 30, 2025

Banking Sector Records Sharp Improvement in Asset Quality

India’s banking system has achieved a significant turnaround in asset quality, with non-performing assets (NPAs) falling to their lowest levels in decades . According to the Reserve Bank of India (RBI) , the gross NPA (GNPA) ratio of scheduled commercial banks declined to 2.1 per cent by September 30, 2025 , while net NPAs dropped to 0.5 per cent , reflecting stronger balance sheets and effective risk management.

RBI Findings and Key Indicators

The improvement has been documented in the RBI’s annual publication “Trends and Progress of Banking in India” . The report highlights that nearly 42.8 per cent of the reduction in GNPAs during 2024–25 resulted from recoveries and loan upgradations. Higher provisioning levels have further reduced net NPAs, improving banks’ capacity to absorb future credit shocks.

Decline in Slippages Signals Structural Strength

Another encouraging trend is the continued fall in the slippage ratio , which measures fresh NPAs as a proportion of standard advances. The ratio declined for the fifth consecutive year , standing at 1.4 per cent by March 2025 . While both public and private sector banks recorded improvements, slippages remained relatively higher in private banks, though still on a downward trajectory.

Factors Driving the NPA Decline

The RBI attributed the sustained improvement to multiple factors, including aggressive recovery and resolution mechanisms, improved borrower performance, tighter credit appraisal standards, and a supportive macroeconomic environment. Strong economic growth has enhanced repayment capacity, while higher capital adequacy and provisioning have reduced systemic stress.

Structural Turnaround in Banking Health

After years of elevated NPAs following the credit boom of the early 2010s, the current trend signals a structural strengthening of India’s banking sector , improving financial stability and lending potential.

Important Facts for Exams

  • Gross NPAs fell to 2.1% by September 2025

  • Net NPAs declined to 0.5%

  • Slippage ratio stood at 1.4% in March 2025

  • Data sourced from RBI’s Trends and Progress of Banking in India

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