There is big relief news for Indian banks
A very big and relief news related to the Indian banking sector has come out. There has been tremendous improvement in the financial health of the country’s banks. According to the latest data, the bad loans i.e. Gross Non-Performing Assets (NPA) of banks have come down to a historic low of 2.15% by September 2025. This figure is also shocking because it is less than the level of 2010-11.
How did this change happen?
Minister of State for Finance Pankaj Chaudhary has confirmed this in reply to a question in the Lok Sabha. He said that for the last eight financial years, there has been a continuous decline in the gross NPA of banks for domestic operations. The foundation of this reform was laid in 2015 itself when the Reserve Bank of India (RBI) started the Asset Quality Review (AQR). After this the government adopted the strategy of ‘4R’. Under this strategy, four main steps were taken: transparent identification of NPAs, resolution, recovery and injecting new capital into public sector banks (recapitalization). These strict and transparent decisions have played an important role in cleaning the banking system.
Government banks showed speed in recovery
It was often talked about the huge NPA burden on public sector banks (PSBs), but the latest figures are presenting a different picture. According to the government, since March 2018, public sector banks have shown more speed in reducing their NPAs than private and foreign banks. If we look at the provisional data for September 2025, the situation becomes quite clear.
- NPA of Public Sector Banks (PSBs): 2.50%
- NPA of private sector banks (PVBs): 1.73%
- NPA of foreign banks: 0.80%
What does this mean for the common man?
In fact, when banks’ money stuck reduces, they have to reduce ‘provisioning’ (keeping money aside for bad loans). Minister Pankaj Chaudhary said that due to reduced provisioning, the profits of banks have increased and their business growth has improved.
When banks’ balance sheets are strong and profits increase, they are in a better position to distribute loans in the market. This simply means that credit growth will increase and it may become easier for needy businesses and individuals to get loans. Additionally, laws like the Insolvency and Bankruptcy Code (IBC), 2016 have taken away control from borrowers and given power to creditors, thereby curbing defaulters.