The slippage ratio of SCBs, which measures the amount of new accretion to bad loans has also improved from 7.1 per cent in FY18 to 1.4 per cent in FY25 and further to 1.3 per cent in FY26, as of September 2025.
Mumbai:India’s banking sector has recorded a sharp improvement in asset quality and credit recovery, with the non-performing asset (NPA) recovery rate of scheduled commercial banks (SCBs) nearly doubling to 26.2 per cent in FY25 from 13.2 per cent in FY18, according to the Economic Survey 2025-26 tabled in Parliament on Thursday by Union Finance Minister Nirmala Sitharaman.
The slippage ratio of SCBs, which measures the amount of new accretion to bad loans has also improved from 7.1 per cent in FY18 to 1.4 per cent in FY25 and further to 1.3 per cent in FY26, as of September 2025.
The Survey said gross non-performing assets (GNPAs) and net NPAs have fallen to multi-decadal and record-low levels, reflecting sustained balance sheet repair across the banking system. Capital adequacy also remained robust, with the capital-to-risk-weighted assets ratio (CRAR) of SCBs standing at 17.2 per cent as of September 2025.
While the Survey noted an improvement in asset quality across most sectors, in contrast the agricultural sector continued to show relatively higher stress. The GNPA ratio for the agri sector stood at 6 per cent in September 2025, marginally lower than 6.1 per cent in March 2025. The agri sector’s share in total NPAs increased from 34.6 per cent to 36.3 per cent over the same period.
Recovery through the Insolvency and Bankruptcy Code (IBC) has strengthened significantly, contributing to improved credit discipline and lower stressed assets. Since its inception in 2016, the IBC has delivered superior outcomes compared with liquidation, with creditors realising ₹3.99 lakh crore from around 1,300 resolved cases.
According to the Survey, public sector banks (PSBs) have also rolled out a new credit assessment model (CAM) based on digital footprints for MSMEs. Between April 1 and November 30, 2025, PSBs sanctioned loans worth over ₹41,500 crore under the CAM framework, leveraging digitally verifiable data for automated loan appraisal and integrating credit guarantee schemes such as CGTMSE.
Financial inclusion indicators continued to strengthen, aided by schemes such as PM Jan Dhan Yojana, PM Mudra Yojana, Stand-Up India and PM SVANidhi, alongside the rapid adoption of UPI. The RBI’s Financial Inclusion Index rose to 67.0 in March 2025 from 64.2 a year earlier.
