India's Banks Achieve Multi-Decade Low NPAs at 2.1%: RBI Report

India's banking sector has achieved a significant milestone with gross non-performing assets (GNPAs) dropping to a multi-decade low of 2.1% as of September 30, 2025. The Reserve Bank of India (RBI) disclosed this in its annual "Trends and Progress of Banking in India" report released on December 29, 2025. Net NPAs also stood steady at 0.5%, reflecting sustained improvements in asset quality. 

Key Drivers of NPA Decline  

During 2024-25, recoveries and upgradations made up 42.8% of the reduction in GNPAs across scheduled commercial banks (SCBs). The slippage ratio, which tracks new NPAs from standard advances, decreased for the fifth consecutive year to 1.4% by the end of March 2025. Both public sector banks (PSBs) and private sector banks (PVBs) experienced lower slippage ratios, although PVBs had higher numbers. 

Sector-Wise Improvements  

PSBs' GNPA ratio improved to 2.6% from 3.5% year-over-year, driven by standard assets rising to 97.2%. PVBs edged down to 1.8% from 1.9%, while foreign banks advanced to 0.9% from 1.2%, with standard assets at 99.1%. In absolute terms, total GNPAs decreased to ₹4.32 lakh crore in 2024-25 from ₹4.81 lakh crore the prior year. 

Broader Banking Resilience  

SCBs kept double-digit growth in deposits and credit in 2024-25, although the rate slowed compared to earlier years. The GNPA trend, which has been improving since 2018-19, hit 2.2% by the end of March 2025 before dropping further. Large borrowal accounts, with over ₹5 crore exposure, stayed stable at 43.9% of total advances. 

Historical Context 

This 2.1% GNPA is the lowest in more than ten years for SCBs. It beats earlier lows, such as the 2.3% noted in previous RBI assessments. The decrease in net NPAs is partly due to high provisioning levels. The report underscores ongoing credit discipline and recovery mechanisms bolstering the sector's stability into 2025-26.