Bank NPAs at historic low, time for fresh reforms: FM Nirmala Sitharaman at PSB Confluence

Finance Minister Nirmala Sitharaman on Monday said non-performing assets (NPAs) in India’s banking sector have fallen to their lowest-ever levels, creating an opportunity for banks to undertake the next phase of reforms aimed at supporting the country’s transition towards a “Viksit Bharat”. 

Speaking at the Public Sector Banks (PSB) Confluence, Sitharaman said the banking sector had emerged from a prolonged period of stress with stronger balance sheets and significantly improved asset quality. 

“There could not have been a better time to discuss banking for Viksit Bharat. Especially with the grind the sector has gone through and come out of all the difficulties. Coming to the root of reforms, NPAs are at the lowest ever and therefore there cannot be a better position with which you can take on reforms,” she said. 

The finance minister also announced that the government would soon constitute a high-level committee on Banking for Viksit Bharat. The panel will examine the future role of the banking sector and draw on the deliberations and recommendations emerging from the two-day PSB Confluence being held on August 17-18. 

The latest data underline the sharp turnaround in banks’ asset quality. According to the Reserve Bank of India’s June 2026 Financial Stability Report, the gross NPA ratio of scheduled commercial banks fell to a multi-decadal low of 1.8% as of March 2026, from 2.3% a year earlier.  

The improvement has been particularly pronounced among public sector banks. Data released by the Finance Ministry showed that the gross NPA ratio of PSBs declined to 1.93% at the end of March 2026, from 2.6% a year earlier and 7.3% in March 2022. Their net NPA ratio fell to 0.39%, also a historic low.  

The broader decline in bad loans marks a significant reversal from the banking sector stress seen in the previous decade. Gross NPAs of scheduled commercial banks had risen to 11.18% in March 2018 before declining steadily following the RBI’s Asset Quality Review, the government’s “4Rs” strategy of recognition, resolution, recapitalisation and reforms, and the strengthening of insolvency and recovery mechanisms.  

Last week, Sitharaman said multilateral development banks (MDBs) have a crucial role to play in de-risking investments, improving the bankability of projects and boosting investor confidence to mobilise private capital at scale across BRICS member countries.