Context
According to the Ministry of Finance, Public Sector Banks (PSBs) recorded their lowest-ever Gross Non-Performing Assets (GNPA) ratio of 1.9% in FY 2025–26, while achieving a record net profit of ₹1.98 lakh crore. Strong credit growth, especially in MSME and retail lending, reflects improved asset quality and banking sector resilience.
Explanation
- A Non-Performing Asset (NPA) is a loan where interest or principal remains overdue for more than 90 days, as per Reserve Bank of India (RBI) norms.
- Gross NPA (GNPA) represents the total value of bad loans before deducting provisions, while Net NPA (NNPA) equals GNPA minus provisions, indicating the actual stressed assets on banks’ books.
- A lower GNPA ratio signifies better asset quality, improved credit discipline and stronger financial stability of banks.
- Capital to Risk-weighted Assets Ratio (CRAR) measures a bank’s capital adequacy and ability to absorb losses, ensuring compliance with Basel III norms.
- Public Sector Banks (PSBs) are majority-owned by the Government of India and play a crucial role in financial inclusion, priority sector lending, MSME financing and infrastructure development.
- Measures such as the Insolvency and Bankruptcy Code (IBC), SARFAESI Act, ECLGS, bank recapitalisation, digital monitoring and prudent provisioning have contributed to reducing NPAs and strengthening the banking sector.
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Gross NPA Ratio and Banking Sector Resilience