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India's Banking Health Soars: NPAs Hit Multi-Decade Low, Recovery Doubles

India's banking system shows robust health with gross NPAs reaching a multi-decade low and net NPAs at a record low. The recovery rate from bad loans has nearly doubled from FY18 to FY25, significantly aided by the Insolvency and Bankruptcy Code. While asset quality has improved across industry, services, and personal loans, the agriculture sector continues to have a relatively higher GNPA ratio. Strong capital buffers and increasing profitability further underscore the sector's stability.

Key Points: Bank NPAs at Record Low, Recovery Doubled: Economic Survey

  • Gross NPA ratio at multi-decadal low
  • Recovery rate doubled to 26.2% in FY25
  • IBC recovery improved to 36.6%
  • Bank capital ratio strong at 17.2%
  • Agriculture sector NPAs remain a higher concern
3 min read

Banks NPAs reach multi-decadal low level, recovery rate doubled in FY25 from FY18: Economic Survey

Economic Survey reveals India's banking NPAs at multi-decade lows, recovery rates doubled since FY18, and strong capital buffers ensuring stability.

"The recovery rate in NPAs in SCBs has approximately doubled from 13.2 per cent in FY18 to 26.2 per cent in FY25. - Economic Survey"

New Delhi, January 29

India's banking system continues to remain stable, supported by strong capital buffers, low non-performing asset ratios, and increasing profitability, according to Economic Survey 2026 released on Thursday.

A significant improvement has been observed in the asset quality of Scheduled Commercial Banks (SCBs), as evidenced by their gross non-performing asset (GNPA) ratio and net NPA ratio, having reached a multi-decadal low level and record low level, respectively.

The Economic Survey further highlighted that the recovery rate in NPAs in SCBs has approximately doubled from 13.2 per cent in FY18 to 26.2 per cent in FY25. The slippage ratio of SCBs, which measures the amount of new accretion to NPAs during the FY as a percentage of standard loans and advances as at the beginning of FY, has also improved from 7.1 per cent in FY18 to 1.4 per cent in FY25 and further to 1.3 per cent in FY26, as of September 2025.

The recovery rate through the Insolvency and Bankruptcy Code, 2016 (IBC/Code) has improved from 28.3 per cent in FY24 to 36.6 per cent in FY25. Through the SARFESI, it has improved from 25.4 per cent in FY24 to 31.5 per cent in FY25.

At the same time, the capitalto-risk-weighted-asset ratio (CRAR) of the SCBs remained strong at 17.2 per cent as of September 2025, it said.

Furthermore, this improvement in asset quality has been observed across broad economic sectors. The GNPA ratio for the industry decreased from 2.3 per cent in March 2025 to 1.9 per cent in September 2025. For services, the ratio decreased from 2.0 per cent to 1.8 per cent, and for personal loans, it decreased from 1.2 per cent to 1.1 per cent, the Economic Survey highlighted.

In contrast, the GNPA ratio for the agriculture sector remains relatively higher at 6.0 per cent in September 2025 and has improved marginally from 6.1 per cent in March 2025. However, the share of this sector in total GNPA has increased from 34.6 per cent to 36.3 per cent over the same period, it said.

On the profitability metrics of banks, the Economic Survey said the profit after tax increased by 16.9 per cent (YoY) in FY25 and by 3.8 per cent (YoY) by September 2025. The return on equity for SCBs has experienced a marginal decline from 13.8 per cent in March 2024 to 13.6 per cent in March 2025; however, it has maintained a steady upward trend since March 2020.

On the other hand, the return on assets has remained stable at 1.4 per cent in March 2025, consistent with the level recorded in March 2024. As of September 2025, these metrics stand at 12.5 per cent and 1.3 per cent, respectively.

- ANI

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Reader Comments

P
Priya S
Good to see numbers improving, but the agriculture sector's NPA ratio at 6% is still worrying. Farmers need better access to credit and support systems. The overall growth won't feel inclusive if this sector lags behind.
R
Rohit P
As someone who works in finance, these metrics are very encouraging. The slippage ratio dropping from 7.1% to 1.3% is a massive improvement. It means banks are doing better due diligence before lending. Kudos to the regulators!
S
Sarah B
While the data looks positive, I hope this translates to easier loans for small businesses and individuals. Sometimes these macro numbers don't reflect the ground reality of getting credit from a bank branch.
V
Vikram M
The recovery rate through IBC improving to 36.6% is the key highlight. It shows the system is finally working to resolve bad debts efficiently. This will boost investor confidence in the Indian market big time.
K
Karthik V
Solid performance overall. The capital buffers are strong at 17.2% CRAR, which is above the regulatory requirement. This resilience is crucial for weathering any future global economic shocks. Well done.

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