India’s Bank GNPAs Fall to Multi-Decade Low of 2.3%: RBI

The Reserve Bank of India (RBI) has reported that gross non-performing assets (GNPAs) in the banking sector declined to a multi-decade low of 2.3% in March 2025, down from 2.6% in September 2024. However, the central bank warned that GNPAs could rise to 2.6% by March 2027, according to its biannual Financial Stability Report (FSR). The drop in bad loans reflects sustained improvement in asset quality, particularly post-asset quality review (AQR) reforms.

Why in News?

RBI’s June 2025 Financial Stability Report has highlighted a substantial decline in gross NPAs to a multi-decade low. The report warns of a moderate uptick in GNPAs over the next two years. It reflects the long-term improvement in banking sector asset quality following AQR and capital infusion. Significant policy implications for banking health, credit growth, and financial resilience.

Current Status of GNPAs (as of March 2025)

• GNPA ratio of Scheduled Commercial Banks (SCBs): 2.3%
• Previous level in September 2024: 2.6%
• Projected GNPA by March 2027: 2.6%

Key Factors for GNPA Reduction

• Aggressive loan write-offs by private and foreign banks.
• Reduced fresh slippages: Slippage ratio stable at 0.7%.
• Asset quality improvements from earlier RBI interventions, especially post-2015 AQR.
• No top-100 borrowers classified as NPAs.

Write-Off Trends

• Write-offs to GNPA ratio in FY25: 31.8% (up from 29.5% in FY24).
• Private and foreign banks drove higher write-offs.
• Marginal decline in write-offs by Public Sector Banks (PSBs).

Sector-Wise GNPA Insights

• Agricultural sector: Highest GNPA at 6.1%.
• Personal loans: Stable GNPA at 1.2%.

Credit card loans

• Public Sector Banks: 14.3% GNPA
• Private Sector Banks: 2.1% GNPA

Large Borrowers Segment

• Share in total GNPAs: 37.5%
• GNPA ratio declined from 3.8% (Sep 2023) to 1.9% (Mar 2025).
• Share in outstanding loans: 43.9%
• Share in total banking credit (Top 100 borrowers): 15.2%, stable.