Banking Resilience: India's NPA Ratio Hits Historic Low

India's banking sector sees a remarkable decline in gross NPAs to 2.67% in June 2024 from 11.18% in 2018. The Finance Ministry attributes this to improved asset quality and increased provision coverage. Public sector banks recorded an impressive net profit, emphasizing proactive governmental support and reforms.

The gross non-performing assets (NPA) ratio for scheduled commercial banks in India fell significantly to 2.67 percent as of June 2024, from 11.18 percent in March 2018, according to the Finance Ministry. The ministry highlighted on social media that asset quality has notably improved and the provisional coverage ratio (PCR) shot up from 49.31 percent in March 2015 to 92.52 percent in June, indicating greater resilience.

Non-performing assets signify loans on which borrowers have failed to make interest or principal payments for 90 days or more. Meanwhile, the provision coverage ratio represents the funds a bank has set aside to cover potential losses from bad debts. As efforts continue to bolster the banking sector, public sector banks (PSBs) saw their gross NPA drop to 3.32 percent in June 2024, down from 4.97 percent in March 2015, and a peak of 14.58 percent in March 2018.

The finance ministry also reported the highest-ever aggregate net profit for scheduled commercial banks at Rs 3.50 lakh crore for the financial year 2023-24, outpacing the Rs 2.63 lakh crore net profit from the previous fiscal year. The government's initiatives were highlighted as crucial in reforms aimed at stabilizing the banking ecosystem, alongside efforts from the Reserve Bank of India's Asset Quality Review initiated in 2015, which aimed at transparent loan classifications and addressing stressed accounts.

(With inputs from agencies.)