New Delhi: The government’s efforts to clean up the banking sector have helped bring down non-performing assets (NPAs) by more than half over the last five years, Parliament was informed Tuesday.
In a written reply to the Rajya Sabha, Minister of State for Finance Pankaj Chaudhary said NPAs across the banking sector—including public sector, private sector, foreign, finance and urban cooperative banks—declined from around Rs 8.73 lakh crore in March 2021 to Rs 4.08 lakh crore in March 2026, a fall of over 53 percent.
The Reserve Bank of India defines NPAs as overdue interest or installment of principal amount for a period of more than 90 days.
The minister also said the gross NPA ratio of scheduled commercial banks has been declining steadily over the past eight financial years, reaching 2.75 percent at the end of March 2024 before falling further to 1.73 percent in March 2026.
“Comprehensive measures have been taken by the Government and the Reserve Bank of India (RBI) to recover and to reduce NPAs, enabled by which, gross non-performing assets (NPAs) of scheduled commercial banks has been continuously declining during the last eight financial years,” the written reply stated.
According to the data shared by the government, public sector banks recorded the sharpest decline in bad loans, with NPAs falling from Rs 6.16 lakh crore in March 2021 to Rs 2.45 lakh crore in March 2026. NPAs of private sector banks also reduced significantly, from Rs 2.02 lakh crore to Rs 1.26 lakh crore during the same period.
Bad loans of foreign banks declined from Rs 10,199 crore to Rs 3,990 crore over the five years.
However, the trend was different for small finance banks, where NPAs nearly doubled from Rs 5,971 crore in March 2021 to Rs 10,449 crore in March 2026.
The government clarified that NPA accounts are closed only after full recovery of dues or through compromise settlements between borrowers and banks, in line with RBI guidelines and banks internal policies.
The minister also reiterated that loan write-offs should not be confused with loan waivers. Referring to the RBI’s Resolution of Stressed Assets Directions, 2025, the government said write-offs are an accounting exercise undertaken to clean bank balance sheets by removing bad debts that are considered unrecoverable or whose recovery would require disproportionate resources.
“Such write-off does not result in waiver of liabilities of borrowers and therefore, it does not benefit the borrower. The borrowers continue to be liable for repayment and banks continue to pursue recovery actions initiated in these accounts,” the written reply stated.
Chaudhary said the Centre and the RBI have undertaken several measures to improve recovery and reduce stressed assets. These include amendments to the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI) and the Recovery of Debt and Bankruptcy Act.
The introduction of automated Early Warning Systems (EWS) in public sector banks, creation of dedicated Stressed Asset Management Verticals, and the RBI’s prudential framework for early resolution of stressed assets have also helped bring down bad loans.
The government said these reforms have strengthened banks’ ability to identify stress early, improve recoveries and enhance overall asset quality.
(Edited by Viny Mishra)
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