RBI Data: India’s Banking Sector Hits 20-Year NPA Low; Records Strongest Profit Surge

India’s banking sector has achieved a historic milestone, recording its lowest level of Gross Non-Performing Assets (GNPAs) in 20 years, which declined from 11.46% (in 2018) to 2.31% (by March 2025), the lowest in 20 years.

• This decline was mainly driven by robust macro-economic fundamentals boosting the Indian banking and Non-Banking Financial (NBF) sectors.
• Similarly, Net NPA (NNPA) ratio dropped to its lowest in the last 2 decades i.e. to 0.52% compared to 6.1% (in 2018), driven by stronger provision buffers.

Key Findings:

GNPA of PSBs and SCBs: As per the official data, GNPAs of Public Sector Banks (PSBs) declined from 9.11% (March 2021) to 2.58% (March 2025).

• Likewise, the GNPAs of Scheduled Commercial Banks (SCBs) reduced from 7.33% to 2.22% during the same time period.
• Also, the Gross NPA ratio of banks decreased to Rs 2,73,413 crore (GNPA ratio of 2.79%) as on March 31, 2025.

NNPAs of PSBs: The data also showed that NNPAs of PSBs decreased from 1.24% in Financial Year 2022-23 (FY23) to 0.52% (in FY25).

Bank Deposits and Credit Tripled: The data showed that domestic deposits and credits have nearly tripled in the last 10 years, with deposits increasing from Rs 88.35 lakh crore (2015) to Rs 231.90 lakh crore (2025) and credit rising from Rs 66.91 lakh crore (2015) to Rs 181.34 lakh crore (2025). 

Improvement in Capital Buffers: The data further showed that capital buffers have strengthened in the last 10 years for instance:

• Capital to Risk Weighted Assets (CRAR): It increased from 12.94% (in March 2015) to 17.36% (in March 2025).
• Common Equity Tier-1 (CET-1): CET-1represents the highest quality capital a bank can hold, increased from 9.98% to 14.81% during the same time period.

Banks Profitability Surged: As per RBI’s data, the profitability of banks improved for the 6th consecutive year in 2023-24.

• PSBs Profit: The total business of PSBs increased from Rs 203 lakh crore in Financial Year 22-23 (FY23) to Rs 252 lakh crore (FY25). The net profit of these banks surged from Rs 1.05 lakh crore to Rs 1.78 lakh crore during the same time period.
• SCBs Profit: SCBs registered their highest ever aggregate net profit of Rs 4.01 lakh crore (in FY25 )over Rs 3.5 lakh crore (in FY24). Also, SCBs recorded an aggregate net profit of Rs 1.02 lakh crore in 1st quarter (Q1: April to June) of FY26. These gains in profitability strengthened with Return of Assets (RoAs) at 1.37% and Returns of Equity (RoE) at 14.1%.

Key Initiatives/Reforms Improving Indian Banks Performance:

Prompt Corrective Action (PCA) Framework: This framework helped in the consolidation of 27 PSBs into 12 by 2020.

Special Recovery Laws: Some of the key legislations like: the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act, 2002) and the Recovery of Debt and Bankruptcy Act have been amended to improve their effectiveness in asset recovery.

Expansion of DRTs Jurisdiction: The Government of India (GoI) has expanded the jurisdiction of Debt Recovery Tribunals (DRTs) from Rs 10 lakh to Rs 20 lakh, aimed to prioritize higher value cases and enhance recovery efficiency.

ECL Framework: In October 2025, the RBI proposed the Expected Credit Loss (ECL) framework.

• The framework, applicable to SCBs including foreign banks, is expected to further enhance risk assessment.

Important Terms:

Gross Non-Performing Assets (GNPAs): It refers to the total value of loans that have turned into NPAs. GNPA is reported as an absolute figure.

Net NPA (NNPA): It excludes the provisions made by the bank from the GNPA, thereby giving the exact value of NPAs after the bank has made specific provisions.

Capital to Risk Weighted Assets (CRAR): It is an important financial metric used to measure the financial stability of a bank by measuring its available capital as a percentage of its risk-weighted credit exposure.