The gross non-performing assets (NPAs) ratio of Scheduled Commercial Banks (SCBs) for domestic operations has fallen steadily over the last eight financial years and reached a historic low of two point one five per cent at end September, 2025 on provisional data. The Reserve Bank of India (RBI) conducted an Asset Quality Review in 2015 and the Government implemented a four Rs strategy of recognising, resolving, recovering and recapitalising alongside broader banking reforms. These steps delivered a marked reduction in gross NPAs, especially among Public Sector Banks (PSBs).

According to data as on 30.9.2025, the gross NPA ratio for SCBs was two point one five per cent, for PSBs two point five per cent, for Private Sector Banks (PVBs) one point seven three per cent and for Foreign Banks zero point eight per cent. PSBs have registered a larger decline in gross NPAs since March, 2018 compared with PVBs and Foreign Banks. The lower NPA burden has reduced provisioning and supported profitability and credit growth.

Asset quality gains have strengthened bank balance sheets and underwriting, aiding loan growth. The slippage ratio, the fresh accretion of NPAs as a percentage of standard advances, has improved for PSBs over the last six financial years and was zero point eight per cent in September, 2025 compared with one point eight per cent in PVBs. The PSB reforms agenda instituted comprehensive early warning systems with approximately 80 triggers and greater use of third party data to enable time bound remedial action.

The Insolvency and Bankruptcy Code, 2016 altered the creditor-borrower framework, visible in more than 30,000 cases with underlying default of Rs. 13.78 trillion (tn) settled at pre-admission stage as of March, 2025. Legal changes included amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act and enhancements to recovery routes such as Debts Recovery Tribunals where pecuniary jurisdiction was raised from Rs. one million (mn) to Rs. two million (mn). The Government and RBI continue to coordinate on measures to speed resolution and boost recoveries.