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NPA Status in India UPSC NOTE


  • In the second quarter of 2019, the NPA ratio of Indian banks stood at 9.2%, indicating that nearly one in 10 loans had turned bad.

  • The bad loans remained hidden until the Reserve Bank of India (RBI) conducted an expansive Asset Quality Review in 2016.

  • From 2016 to 2019, the NPA ratio remained high but started declining afterward, including during the pandemic.

  • Factors contributing to the decline in NPAs include the Insolvency and Bankruptcy Code, which aided the recovery of distressed loans, and a shift in bank lending from industries to personal loans.


  • Uncertainties existed during and after the pandemic regarding the share of loan accounts under COVID-19-related moratoriums that would turn into NPAs.

  • The sudden shift to personal loans raised concerns about the ability of borrowers to service these loans if industries, which provide salaries to borrowers, were not functioning well.

  • The decline in NPAs, particularly in FY20, was largely due to loan write-offs by banks to maintain healthy balance sheets and preserve capital for lending fresh loans.

  • The latest financial stability report by the RBI indicates a decline in both Gross NPAs (GNPAs) and Net NPAs, reaching the lowest levels since 2015.

  • The profitability of the banking sector has improved, with the Return on Assets (RoA) climbing to 1.1% in 2023 from a negative 0.2% in 2018.

  • The Capital to Risk-Weighted Assets Ratio (CRAR), a measure of a bank's health, reached a record peak of 17.1% in 2023.



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: NPA Status in India UPSC NOTE
NPA Status in India UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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