New Delhi: Gross Non Performing Assets (NPAs) reduced from 9.11 per cent to 2.58 per cent from March 2021 to March 2025, the Ministry of Finance said on July 22, 2025.
To recover and reduce NPAs, the Government and RBI implemented a comprehensive framework. The government stated that structural and institutional reforms were adopted to tackle the NPA issue. It said that reforms were introduced in IBC, DRTs, and RBI’s Prudential Norms for early resolution.
Following are the steps taken by the Government and the RBI to recover and reduce NPAs:
The government implemented comprehensive measures including change in credit culture. The Insolvency and Bankruptcy Code (IBC) fundamentally changed the creditor-borrower relationship, which helped in “taking away control of the defaulting company from promoters/owners, and debarring wilful defaulters from the resolution process”.
The ministry of finance further informed that personal guarantor to corporate debtors has been brought under the ambit of IBC to make the process more stringent.
The government said that amendments were introduced in Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Recovery of Debt and Bankruptcy Act to make it more effective.
To enable the Debt Recovery Tribunal (DRT) to focus on high value cases resulting in higher recovery for the banks and financial institutions, the government increased Pecuniary jurisdiction of (DRTs) from Rs 10 lakhs to Rs 20 lakhs.
Specialised stressed assets management verticals and branches have been opened by Public Sector Banks so that effective monitoring and focused follow-up can be done of NPA accounts. This process ensures improved resolution/ recoveries.
“Prudential Framework for resolution of stressed assets was issued by RBI to provide a framework for early recognition, reporting and time bound resolution of stressed assets, with a build-in incentive to lenders for early adoption of a resolution plan,” the release stated.
(With inputs from PIB release)