Coverage: weekly note · Information to 5 January 2026
TGB Premium Intelligence — Open Access
This report was originally available exclusively to TGB Premium subscribers. It is now part of our open research archive.
TGB Weekly Research Note · 5 January 2026
The Reserve Bank of India puts the gross NPA ratio of scheduled commercial banks at a multi-decadal low of 2.2% at end-March 2025, down from 11.2% in March 2018.
The desk view
The RBI's Report on Trend and Progress of Banking in India 2024-25 confirms that the gross NPA (GNPA) ratio of scheduled commercial banks (SCBs) fell to a multi-decadal low of 2.2% at end-March 2025, from 2.7% a year earlier. That is 9.0 percentage points below the 11.2% recorded in March 2018. The net NPA ratio stood at 0.5%. Three caveats matter. The figure depends on the data series used: the June 2025 Financial Stability Report (FSR) put March 2025 at 2.3% on supervisory data. The clean-up leaned on write-offs, which accounted for 57.2% of the GNPA reduction in 2024-25. And the remaining pressure points are small finance banks, whose ratio rose, and unsecured retail loans, which accounted for 53.1% of retail slippages.
How low, and on which numbers
The RBI's wording is consistent across its publications even where its figures differ slightly. The June 2025 FSR described banks as bolstered by robust capital buffers, multi-decadal low non-performing loans and strong earnings, with GNPA and NNPA ratios of 2.3% and 0.5%. The Report on Trend and Progress, published on 29 December 2025, gives 2.2% for end-March 2025, calculated from banks' annual accounts. The December 2025 FSR then reported a fresh multi-decadal low of 2.2% for September 2025, with the NNPA ratio at a record low of 0.5%, while the Report on Trend and Progress put September 2025 at 2.1% on supervisory data. The RBI dates the improving trend from 2018-19 and says it continued through 2024-25. Against a 10-year average GNPA ratio of 6.9% in the FSR's health tracker, the gap is wide on any series.
SCB gross NPA ratio, %
Source: Reserve Bank of India, Report on Trend and Progress of Banking in India 2018-19 (press release), 24 December 2019; Reserve Bank of India, Report on Trend and Progress of Banking in India 2024-25, 29 December 2025.
How the stock was cleared
The RBI attributed the early turnaround to traction under the Insolvency and Bankruptcy Code, with recapitalisation shoring up public sector banks. By 2024-25 the composition of the reduction had shifted towards write-offs. Of ₹275,344 crore of GNPAs removed that year, ₹157,563 crore was written off, while recoveries of ₹67,693 crore and upgradations of ₹50,087 crore made up around 42.8%. New additions of ₹226,359 crore show that the stock is still being replenished. The June 2025 FSR said write-offs were a major component of NPA reduction over the last five years, and that the write-offs to GNPA ratio rose to 31.8% in 2024-25 from 29.5%.
Inflows have eased as well. The slippage ratio fell for the fifth consecutive year to 1.4% at end-March 2025 and to 1.3% at end-September 2025. Provisioning coverage was 76.3% in March 2025, against a 10-year average of 62.4%.
Where the residual risk sits
The aggregate hides divergence by bank group. In 2024-25 public sector banks cut their ratio by 0.9 percentage points, while small finance banks moved the other way, up 1.2 percentage points to 3.6%. According to the December 2025 FSR, public sector banks still held more than three-fifths of SCB GNPAs, against 54.1% of loans.
Gross and net NPA ratios by bank group, %
| Bank group | GNPA 2023-24 | GNPA 2024-25 | NNPA 2024-25 |
|---|---|---|---|
| Public sector banks | 3.5 | 2.6 | 0.5 |
| Private sector banks | 1.9 | 1.8 | 0.5 |
| Foreign banks | 1.2 | 0.9 | 0.1 |
| Small finance banks | 2.4 | 3.6 | 1.4 |
| All SCBs | 2.7 | 2.2 | 0.5 |
Source: Reserve Bank of India, Report on Trend and Progress of Banking in India 2024-25, 29 December 2025.
The December 2025 FSR flags unsecured retail lending. Unsecured loans accounted for 53.1% of retail slippages, and private banks had the larger share of fresh unsecured slippages, with write-offs that remain elevated. Write-off ratios shot up for private and foreign banks in the current financial year while falling for public sector banks.
What could move the ratio next
The RBI's macro stress test projects the GNPA ratio of 46 banks easing from 2.1% in September 2025 to 1.9% in March 2027 in the baseline, but rising to 3.2% and 4.2% under its two adverse scenarios. Measurement will also change: the RBI has proposed moving SCBs, other than small finance, payments and regional rural banks, to an expected credit loss framework from 1 April 2027, with a five-year transition, because incurred-loss provisioning delays the recognition of stress. The multi-decadal low is real, but it reflects write-offs as well as lower slippage, and expected-loss provisioning would recognise stress earlier than the current approach.
What to watch
- 1 April 2027: proposed start of the expected credit loss framework for most SCBs, with a five-year transition
- March 2027: horizon of the RBI's baseline and adverse GNPA projections for 46 banks
Primary sources: Reserve Bank of India, Report on Trend and Progress of Banking in India 2024-25, 29 December 2025; Reserve Bank of India, Report on Trend and Progress of Banking in India 2018-19 (press release), 24 December 2019; Reserve Bank of India, Financial Stability Report, June 2025, 30 June 2025; Reserve Bank of India, Financial Stability Report, December 2025, 31 December 2025.