Gross NPAs of banks fall to multi-decade low of 2.1%: RBI report, Pg13

Key Highlights:

• Gross Non-Performing Assets (GNPA) of banks fell to a multi-decade low of 2.1% by the end of September 2025.
• Net NPA (NNPA) ratio remained stable at 0.5% at the end of September 2025.
• In 2024-25, gross NPAs of banks amounted to Rs 4.32 lakh crore, a decrease from Rs 4.81 lakh crore in 2023-24.
• Recoveries from bad loans and upgrades contributed to 42.8% of the reduction in GNPAs of banks in 2024-25.
• The slippage ratio declined for the fifth consecutive year to 1.4% at the end of March 2025 and further to 1.3% as of September 2025.

Detailed Insights:

• The improvement in asset quality of banks, indicated by declining GNPA ratios, has been observed since 2018-19 and continued through 2024-25.
• Public Sector Banks (PSBs) saw their gross NPAs decrease from 3.5% to 2.6%, while Private Sector Banks (PVBs) experienced a slight decrease from 1.9% to 1.8%.
• Small Finance Banks experienced a deterioration in asset quality, with their gross NPAs rising from 2.4% to 3.6%.
• Scheduled Commercial Banks' proportion of standard assets in total advances increased to 97.7% at the end of March 2025, driven by improvements in PSBs and foreign banks.
• The share of large borrowal accounts remained broadly unchanged at 43.9% at the end of March 2025.
• The Special Mention Accounts (SMA) ratios for scheduled commercial banks declined in 2024-25, except for SMA-1, which increased due to a rise in SMA-1 for PSBs.
• The restructured standard advances ratio decreased for both overall and large borrowal accounts, primarily led by PSBs.

Key Concepts Involved:

• Gross Non-Performing Asset (GNPA): The total value of loans that are in default or are close to being in default.
• Net Non-Performing Asset (NNPA): GNPAs less the provisions made by the bank for potential losses from these assets.
• Slippage Ratio: The rate at which standard, performing assets become non-performing assets.
• Special Mention Accounts (SMA): Bank accounts that show early signs of stress, categorized by the delay in principal or interest payment.