Key Highlights
- Gross Non‑Performing Assets have slipped to a multi‑decade low of 2.3% in March 2025.
- The RBI’s forecast signals a modest uptick, projecting the ratio to reach approximately 2.6% by March 2027.
- Reforms linked to the post‑2015 Asset Quality Review combined with capital injections have underpinned this steady quality lift.
- Only the agricultural segment recorded a high GNPA percentage at 6.1%.
- Private and foreign banks undertook the bulk of write‑offs, curbing losses in the public‑sector domain.
Detailed Insights
In FY25 the write‑off to GNPA ratio climbed to 31.8% from 29.5% in FY24, driven largely by private and foreign institutions. Public Sector Banks (PSBs) posted a slight decline in write‑offs. The slippage ratio – the share of new loans that become non‑performing within the first 12 months – remained stable at 0.7%, indicating disciplined credit origination. Sectoral analysis shows a stark contrast: while agriculture lingers at 6.1% GNPA, personal loans sit at a commendable 1.2%. Credit‑card exposure in PSBs is noticeably higher (14.3%) versus 2.1% in private entities.
Large borrowers, comprising 37.5% of total GNPAs, witnessed a reduction in their GNPA ratio from 3.8% in September 2023 to 1.9% in March 2025. Their share of outstanding loans stands at 43.9% and occupies 15.2% of the total banking credit, a figure that has remained unchanged since the last assessment.
The RBI’s June 2025 Financial Stability Report underscores the long‑term benefits of the AQR framework and signals a cautiously optimistic outlook for further resilience in the banking ecosystem.
Key Concepts
- Gross Non‑Performing Asset (GNPA) – the ratio of total non‑performing assets to the entire asset base, expressed as a percentage.
- Asset Quality Review (AQR) – a regulatory framework introduced post‑2015 to assess and improve the asset quality of banks.
- Slippage Ratio – the proportion of newly issued loans that become non‑performing within the first year of disbursement.
- Write‑off – the process of removing a loan from the books as a loss due to borrower default.
- Top‑100 Borrowers – the largest recipients of credit, typically comprising the biggest corporates and real‑estate entities.