Gross NPAs decreased from ₹6.16 lakh crore in March 2021 to ₹2.83 lakh crore by March 2025, reflecting a consistent improvement in asset quality year after year, according to information shared by Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in the Rajya Sabha on Tuesday.
This sharp reduction in bad loans is the result of comprehensive and coordinated efforts by the Government of India and the RBI, including a range of structural, legal, and regulatory reforms aimed at strengthening the financial ecosystem and improving recovery mechanisms.
One of the key reforms has been the implementation of the Insolvency and Bankruptcy Code (IBC), which has fundamentally changed the creditor-borrower relationship by stripping defaulting promoters of control and barring wilful defaulters from the resolution process. Personal guarantors to corporate debtors have also been brought under the IBC framework, making the resolution process more stringent.
In addition, recovery-related legislation such as the SARFAESI Act and the Recovery of Debt and Bankruptcy Act have been amended to enhance their effectiveness.
The jurisdictional limit of Debt Recovery Tribunals (DRTs) was increased from ₹10 lakh to ₹20 lakh, allowing them to focus on high-value cases and thereby improving recovery outcomes. Public sector banks have also established dedicated verticals and branches to manage stressed assets more effectively. These specialized units, combined with the deployment of business correspondents and on-ground recovery models, have contributed to the accelerated resolution of NPAs.
The statement said RBI has introduced a Prudential Framework for the resolution of stressed assets, which emphasizes early identification and reporting of stress, along with time-bound resolution plans. This framework provides incentives to lenders for prompt action, helping avoid value erosion.
To ensure fair valuation and transparency in asset sales, especially under the SARFAESI Act, RBI guidelines mandate that banks obtain independent property valuations. For properties valued at ₹50 crore or more, at least two independent valuation reports are required, and e-auctions are recommended to ensure competitive pricing and broader participation.
Further, under the RBI’s Income Recognition, Asset Classification and Provisioning (IRAC) norms, banks are required to have board-approved policies for the empanelment of qualified valuers. Valuations of immovable properties used as collateral must be updated at least once every three years. As an additional safeguard, banks may report valuers who overstate asset values to the Indian Banks’ Association (IBA), under guidelines issued through the Joint Lenders Forum (JLF).
