India’s gross non-performing assets (NPAs) in public sector banks (PSBs) have dropped to 2.58 percent in 2025, a decline hailed as the outcome of concerted efforts by the Reserve Bank of India and the central government, according to economist Pankaj Jaiswal.
In his remarks to IANS, Jaiswal emphasized that this marked improvement was enabled by the synergy between fiscal and regulatory bodies, aligning on a shared objective to strengthen India’s banking system. Citing Minister of State for Finance Pankaj Chaudhary, he noted that gross NPAs have fallen sharply from ₹6,16,616 crore in March 2021 to ₹2,83,650 crore in March 2025.
Jaiswal pointed to the introduction of the Insolvency and Bankruptcy Code as a pivotal reform, one that curtailed the previous practice of evergreening and provided resolution pathways for stressed industrial sector accounts. He argued that the legal framework had cleared persistent defaulters from management roles and disrupted promoter control over defaulting firms, contributing to better asset quality.
He credited the RBI’s Asset Quality Review (AQR) process for improving transparency, and said its insistence on branch-level monitoring of stressed assets was instrumental in reducing NPA incidence. This, he added, ensured early recognition and tighter oversight before loans slipped into default.
The economist also highlighted changes in loan disbursal procedures, describing how public banks now evaluate credit history and repayment capability prior to sanctioning loans—resulting in stronger underwriting and portfolio resilience.
Jaiswal stated that the Centre’s NPA strategy was “clear and targeted,” while the RBI’s complementary role refined supervisory controls and embedded accountability in lending decisions. The overall outcome, he said, represented a “significant accomplishment” for India’s financial governance and institutional integrity.
