New Delhi: Public sector banks in India have significantly reduced their gross non-performing assets (NPAs) from 9.11% in March 2021 to 2.58% by March 2025, according to provisional data from the Reserve Bank of India (RBI), Minister of State for Finance Pankaj Chaudhary stated in a written reply in the Rajya Sabha today.
This decline, lowering NPAs or bad loans from Rs. 6,16,616 crore in March 2021 to Rs. 5,40,958 crore in March 2022, Rs. 4,28,197 crore in March 2023, Rs. 3,39,541 crore in March 2024, and Rs. 2,83,650 crore in March 2025, reflects a series of measures by the government and RBI to address bad loans and strengthen the banking system.
Providing details, Chaudhary said the government and RBI have introduced a comprehensive set of steps to recover and reduce NPAs (“bad loans”). The Insolvency and Bankruptcy Code (IBC) (“bankruptcy law”) has transformed the creditor-borrower relationship by removing control from defaulting company owners and barring “wilful defaulters” from resolution processes. The IBC now also includes “personal guarantors” (individuals backing corporate loans), increasing accountability. Amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act) (“asset recovery law”) and the Recovery of Debt and Bankruptcy Act have streamlined debt recovery processes. The “pecuniary jurisdiction” (minimum case value) of Debt Recovery Tribunals (DRTs) (“debt recovery courts”) was raised from Rs. 10 lakh to Rs. 20 lakh, enabling these tribunals to focus on high-value cases, which has led to higher recoveries for banks and financial institutions.
Public sector banks have established “specialised stressed assets management verticals” (dedicated bad loan units) and branches to closely monitor and expedite resolution of NPAs (“bad loans”). The deployment of “business correspondents” (local agents) and a “feet-on-street model” (direct outreach) has further supported recovery efforts. The RBI’s “Prudential Framework” (guidelines for handling stressed assets), issued to provide a structure for early recognition, reporting, and time-bound resolution of “stressed assets” (problem loans), includes incentives for banks to adopt early resolution plans, encouraging prompt action.
To ensure transparency in asset valuation, RBI mandates banks to follow a board-approved policy for property valuation, using “professionally qualified independent valuers” (property appraisers) selected through a prescribed empanelment process. Banks maintain a register of approved valuers. Properties are valued before loan approvals as part of the appraisal process and during recovery under the SARFAESI Act (“asset recovery law”). For properties valued at Rs. 50 crore or above, banks obtain two independent valuation reports to ensure accuracy. When seizing properties for NPA accounts, banks take possession and obtain valuations from approved valuers before disposal through “e-auctions” (online property sales), which attract a wide range of buyers and aim for better “price discovery” (fair market pricing). The RBI’s guidelines on the sale of stressed assets emphasise e-auctions as a preferred method for transparency. Additionally, the master circular on “Income Recognition, Asset Classification and Provisioning (IRAC) norms” (accounting standards), dated July 1, 2015, requires collateral such as immovable properties to be valued every three years by empanelled valuers. The “Joint Lenders Forum (JLF) guidelines” (bank collaboration rules), issued by RBI in February 2014, allow banks to seek explanations from valuers who overstate security values and report their names to the Indian Banks Association (IBA) for accountability.
These measures have contributed to a steady decline in bad loans, strengthening India’s banking sector, Chaudhary stated.
– global bihari bureau
