Banks report sharp improvement in asset quality in FY25; gross NPAs fall across segments: RBI report

Reserve Bank of India

Indian banks continued to clean up their balance sheets in 2024-25, with gross non-performing assets (NPAs) declining sharply across bank groups, reflecting sustained recoveries, upgrades and write-offs, data from the Reserve Bank of India’s (RBI) Trend and Progress of Banking in India 2024-25 report showed.

Gross NPAs of scheduled commercial banks (SCBs) fell to Rs 4.31 lakh crore at end-March 2025 from Rs 4.81 lakh crore a year earlier. As a result, the gross NPA ratio declined to 2.2 percent in 2024-25 from 2.7 percent in the previous year, highlighting steady improvement in asset quality amid strong credit growth.

Public sector banks (PSBs), which account for the largest share of stressed assets, saw gross NPAs decline to Rs 2.84 lakh crore at end-March 2025 from Rs 3.40 lakh crore a year ago. Their gross NPA ratio improved significantly to 2.6 percent from 3.5 percent in 2023-24.

Private sector banks also reported a marginal improvement, with the gross NPA ratio easing to 1.8 percent from 1.9 percent, while foreign banks saw their ratio decline to 0.9 percent from 1.2 percent.

During 2024-25, schedule commercial banks added Rs 2.26 lakh crore of fresh NPAs, but reductions exceeded additions, led by recoveries, upgradations and write-offs totalling Rs 2.75 lakh crore. Write-offs accounted for the largest portion of reductions at Rs 1.58 lakh crore, followed by recoveries of nearly Rs 67,693 crore.

Net NPAs of the banking system also declined to Rs 95,388 crore in 2024-25 from Rs 1.07 lakh crore a year earlier, with the net NPA ratio easing to 0.5 percent from 0.6 percent, indicating better provisioning buffers.

Meanwhile, urban co-operative banks (UCBs) also reported an improvement in asset quality at end-March 2025. Gross NPAs of all UCBs declined to Rs 23,072 crore from Rs 25,395 crore a year earlier, while the gross NPA ratio fell to 6.2 percent from 7.3 percent. Net NPAs of UCBs nearly halved to Rs 2,273 crore, bringing the net NPA ratio down to 0.7 percent from 1.2 percent.

Provisioning coverage improved across UCBs, rising to 90.1 percent in 2025 from 84.6 percent a year earlier.