Gross NPAs of Public Sector Banks drop sharply to 2.58% in FY25: Finance Ministry

The gross non-performing assets (NPAs) of public sector banks (PSBs) have seen a significant decline—from 9.11% of total loans in March 2021 to 2.58% in March 2025, according to Union Minister of State for Finance Pankaj Chaudhary. He shared this data in a written reply to the Rajya Sabha on Tuesday, crediting sustained government and RBI efforts for the turnaround.

The minister highlighted that the total value locked in gross NPAs has reduced from Rs 6.16 lakh crore in March 2021 to Rs 2.83 lakh crore in March 2025.

Chaudhary attributed the steady improvement to a multi-pronged strategy adopted by the government and the Reserve Bank of India (RBI) to strengthen recovery mechanisms and ensure early resolution of bad loans.

“The Insolvency and Bankruptcy Code (IBC) has fundamentally altered the borrower-creditor relationship,” he said, adding that the IBC ensures defaulting company promoters lose control, and wilful defaulters are kept out of the resolution process.

In addition, personal guarantors of corporate debtors have also been brought under the IBC, tightening the legal net around defaulters.

To further bolster recovery efforts:

Amendments were made to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and the Recovery of Debts and Bankruptcy Act.

The pecuniary jurisdiction of Debt Recovery Tribunals (DRTs) was raised from Rs 10 lakh to Rs 20 lakh to allow DRTs to focus on high-value cases.

Public sector banks have also taken internal steps:

Formation of specialised stressed assets management verticals and branches to monitor and resolve NPAs.

Adoption of business correspondents and “feet-on-street” model to improve recoveries at the grassroots.

The RBI's prudential framework also encourages banks to adopt resolution plans early, with built-in incentives for quick action, the minister noted.

To ensure transparency during loan disbursement and recovery:

Banks follow RBI-approved policies for property valuation by independent professionals.

Properties worth Rs 50 crore or more are subject to at least two independent valuations.

Prior to selling assets under the SARFAESI Act, banks take possession and re-evaluate them through empanelled valuers.

RBI also recommends e-auction for asset sales to ensure better price discovery and wider participation.

Chaudhary concluded that these sustained efforts have significantly improved the health of public sector banks, putting them on a stronger and more stable financial footing.