 "NPA")
The gross non-performing assets (NPAs) of public sector banks (PSBs) have shown a consistent decline over the past five financial years. According to government data, gross NPAs reduced from 9.11 per cent in March 2021 to 2.58 per cent in March 2025.
In a statement issued on Tuesday, the Ministry of Finance said, "Both the government and the Reserve Bank of India (RBI) have introduced several measures to tackle the issue of rising NPAs and improve recovery rates."
Listing out the measures, the statement added, "A fundamental shift in credit discipline through the Insolvency and Bankruptcy Code (IBC), which has reshaped the borrower-creditor relationship. This law has stripped defaulting promoters of control over their companies and barred wilful defaulters from participating in the resolution process. Additionally, personal guarantors of corporate debtors are now covered under the IBC."
It further said, "Amendments to existing laws such as the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002 and the Recovery of Debts and Bankruptcy Act to make them more effective in recovery proceedings."
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Focus on high-value cases
The government also increased the financial limit for cases handled by Debt Recovery Tribunals (DRTs) from ₹10 lakh to ₹20 lakh, as per the finance ministry. This allows DRTs to concentrate on higher-value accounts, thereby improving recovery for banks and financial institutions.
Besides, public sector banks have established dedicated verticals and branches for stressed asset management. These specialised units focus on active monitoring and targeted recovery of NPAs. Measures like deploying business correspondents and the "Feet-on-Street" model have further supported this effort.
RBI’s prudential framework
To ensure early detection and resolution of stressed assets, RBI issued a Prudential Framework, which requires timely recognition, reporting, and resolution. It also encourages banks to act swiftly by offering incentives for early implementation of resolution plans.
Banks follow strict procedures for property valuation according to RBI guidelines. These include:
- Having a board-approved policy to ensure valuations are conducted by independent, qualified valuers.
- Creating a panel of professional valuers with the required credentials and maintaining a register of these valuers.
- Conducting property valuations before loan sanctions and again before selling assets under SARFAESI.
"For properties worth ₹50 crore or more, banks must obtain at least two independent valuation reports. After taking possession of an asset from a defaulting borrower, valuation is done again before disposal," said the statement. RBI also encourages the use of e-auctions for the sale of such properties to attract more bidders and achieve better price discovery.
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