‘Bank GNPAs decline to multi-decadal low of 2.3% in March’
Mumbai: Indian economy remains a key driver of global growth on the back of sound macroeconomic fundamentals and prudent policies, the Reserve Bank said on Monday.
In its bi-annual Financial Stability Report (FSR), the central bank also said elevated economic and trade policy uncertainties are testing the resilience of the global economy and the financial system.
The gross non-performing assets (NPAs) of the banking system declined to a multi-decadal low of 2.3 per cent in March 2025, the Reserve Bank also said.
“Financial markets remain volatile, especially core government bond markets, driven by shifting policy and geopolitical environment. Alongside, existing vulnerabilities such as soaring public debt levels and elevated asset valuations have the potential to amplify fresh shocks,” the Reserve Bank of India (RBI) said.
Despite an uncertain and challenging global economic backdrop, it said the Indian economy remains a key driver of global growth, “underpinned by sound macroeconomic fundamentals and prudent macroeconomic policies”.
“The domestic financial system is exhibiting resilience fortified by healthy balance sheets of banks and non-banks. Financial conditions have eased supported by accommodative monetary policy and low volatility in financial markets. The strength of the corporate balance sheets also lends support to overall macroeconomic stability,” the RBI said.
According to the report, the soundness and resilience of scheduled commercial banks (SCBs) are bolstered by robust capital buffers, multi-decadal low non-performing loans ratio and strong earnings.
Results of macro stress tests affirm that most SCBs have adequate capital buffers relative to the regulatory minimum even under adverse stress scenarios. Stress tests also validate the resilience of mutual funds and clearing corporations, it added.
The GNPA level for all the scheduled commercial banks had stood at 2.8 per cent in the year-ago period and 2.6 per cent in September 2024.
The RBI said the GNPAs for 46 banks accounting for 98 per cent of the total assets of scheduled commercial banks (SCBs), may rise to 2.6 per cent by March 2027.
It can be noted that dud assets have been one of the most challenging part for the banking system for a large part of the latter part of last decade especially due to stress among corporate segment, but the system has been improving on the key ratios ever since.
Given the prevalent tendencies among banks to evergreen loans or not recognise NPAs at all, the Reserve Bank had to step in and force lenders to recognise certain loans as non-performing through the asset quality review.
As the state-run lenders had to be capitalised using public money as a result of the same.
The level of the GNPAs at shadow banks, or NBFCs, was at 3 per cent across types in March 2025, the FSR said, adding that for a sample set of lenders commanding a major share of assets under management, the same will go up to 3.3 per cent in March 2026 from 2.9 per cent in March 2025.
The FSR said loan write-offs, including the technical write-offs which can be recovered in the future, were one of the prime reasons for the reduction in GNPAs at banks over the last five years.
As per the FSR, write-offs to GNPA ratio for SCBs moved up to 31.8 per cent in FY25 from 29.5 per cent in the previous year, led by private sector lenders and foreign banks, and added that write-offs by PSBs exhibited a marginal decline.
The half-yearly slippage ratio, measuring new accretions to NPAs as a share of standard advances at the beginning of the half-year, remained stable at 0.7 per cent.
From a sectoral perspective, the agricultural sector had the highest contribution to GNPAs at 6.1 per cent, while it was broadly stable on the personal loans side at 1.2 per cent.
However, public sector banks’ GNPAs from the credit card segment moved up to 14.3 per cent as against 2.1 per cent in the case of the private sector rivals.
Share of the large borrowers in the GNPAs was 37.5 per cent as compared to their 43.9 per cent share in the overall outstanding loans.
This cohort’s GNPA ratio declined from 3.8 per cent in September 2023 to 1.9 per cent in March 2025, the FSR said.
None of the top-100 borrowers were classified as NPAs, the FSR said, adding that their share in the overall loan pie was stable over the last six months at 15.2 per cent.
In the case of urban cooperative banks, the GNPA ratio improved significantly to 6.1 per cent in March 2025.
