The Survey noted that the recovery rate in NPAs of Scheduled Commercial Banks (SCBs) rose from 13.2 per cent in FY18 to 26.2 per cent in FY25.
File Photo: ANI
India’s banking sector has recorded a significant improvement in asset quality, with recovery rates in non-performing assets (NPAs) nearly doubling over the past seven years, according to the Economic Survey 2026 tabled in Parliament on Thursday.
The Survey noted that the recovery rate in NPAs of Scheduled Commercial Banks (SCBs) rose from 13.2 per cent in FY18 to 26.2 per cent in FY25.
Advertisement
Both gross and net NPA ratios have fallen to multi-decadal and record lows, respectively, while the capital-to-risk-weighted-asset ratio (CRAR) of SCBs remained robust at 17.2 per cent as of September 2025.
Advertisement
Regional Rural Banks (RRBs) also reported strong financial performance following consolidation and technology integration measures. The number of RRBs was reduced from 196 to 28 under the One-State-One-RRB policy.
As a result, RRBs posted a record consolidated net profit of Rs 7.6 thousand crore in FY24, followed by Rs 6.8 thousand crore in FY25. They have consistently exceeded the priority sector lending target of 75 per cent of adjusted net bank credit.
The Survey highlighted major policy initiatives to boost credit flow to micro, small and medium enterprises (MSMEs).
Public Sector Banks launched a digital Credit Assessment Model (CAM) in 2025, under which over Rs 3.2 lakh crore worth of MSME loan applications were processed between April and November 2025, with sanctions exceeding Rs 41.5 thousand crore.
India’s microfinance sector has also expanded rapidly, with active borrowers nearly doubling from 330 lakh in FY14 to 627 lakh in FY25.
During the same period, the gross loan portfolio of microfinance institutions grew nearly seven-fold, while branch networks expanded significantly.
On financial inclusion, the Survey said the Pradhan Mantri Jan Dhan Yojana has led to the opening of 55.02 crore bank accounts as of March 2025, most of them in rural and semi-urban areas.
The RBI’s Financial Inclusion Index rose to 67.0 in March 2025 from 64.2 a year earlier, reflecting steady progress.
The Insolvency and Bankruptcy Code (IBC) was cited as a key driver of improved credit discipline.
Creditors recovered 94 per cent of the fair value of resolved businesses, prompting S&P Global Ratings to upgrade India’s insolvency regime from ‘Group C’ to ‘Group B’ in December 2025.
The Economic Survey said the combined impact of regulatory reforms, digital infrastructure, and targeted government schemes has strengthened India’s financial system, making it more resilient, diversified, and inclusive.
Advertisement
