According to the Reserve Bank of India’s June 2025 Financial Stability Report, gross non-performing assets (NPAs) in scheduled commercial banks declined to 2.3%—the lowest level in decades.

The improvement is driven by loan recoveries, prudent lending, and strong capital buffers, although future projections suggest a slight increase under stress conditions.

Key Points:

• India’s gross NPAs fell to 2.3% in March 2025, down from 2.6% in September 2024, reflecting the healthiest asset quality in over two decades.
• The improvement is credited to higher recoveries, write-offs (which accounted for 31.8% of NPAs), and a reduction in fresh slippages.
• Net NPAs dropped to a record low of 0.5%, indicating stronger financial resilience and loss absorption capacity of Indian banks.
• RBI’s stress test projections suggest gross NPAs could rise to 2.5% by March 2027 in a baseline scenario, and up to 5.6% in severely adverse economic conditions.
• Capital adequacy ratio (CRAR) remains strong at 17.2% as of March 2025, well above the regulatory requirement of 9%, ensuring stability in the banking sector.