Writeoffs major factor for lower NPAs in past 5 years, says RBI report

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Write-offs were a major contributor to the reduction in non-performing assets (NPAs) over the past five years, the Reserve Bank of India (RBI) said in its Financial Stability Report. The asset quality of scheduled commercial banks (SCBs) improved, with gross NPA and net NPA ratios declining to multi-decadal lows of 2.3 per cent and 0.5 per cent, respectively, in 2024-25 (FY25).

 

“The write-offs to gross NPA ratio for SCBs moved up marginally to 31.8 per cent in FY25 from 29.5 per cent in the previous year, led by private banks and foreign banks, while write-offs by public-sector banks (PSBs) saw a marginal decline. Disaggregation of NPA movements revealed that write-offs were a major component of NPA reduction over the past five years,” the RBI said.

 

Even as unsecured retail lending has moderated — accounting for 25 per cent of retail loans and 8.3 per cent of gross advances — its asset quality has relatively weakened compared to the overall retail portfolio, with a gross NPA ratio of 1.8 per cent versus 1.2 per cent in March 2025, especially in the case of private-sector banks (PVBs). 

 

Slippages in unsecured retail loans remained elevated for PVBs, with fresh slippages in this segment continuing to dominate overall slippages in retail loans. The share of PVBs in fresh slippages was 78.9 per cent in the second half of FY25, compared to 11.3 per cent for PSBs and 6.4 per cent for small finance banks.

 

The write-offs by private lenders stood at 81.9 per cent in FY25, while those by PSBs accounted for 10.9 per cent in the unsecured retail loan segment.

 

“PVBs’ contribution is significantly higher among bank groups. Alongside, write-offs continue to remain a key contributing factor to NPA reduction in the unsecured retail portfolio, especially among PVBs,” the RBI said.