After a lending boom, Indian banks were crushed by bad loans — gross NPAs hit 11.2% in 2018. A clean-up followed: the 2016 Insolvency & Bankruptcy Code, big capital injections, and the merger of public-sector banks from 27 into 12.
Banking & Financial Reforms
Banking & Financial Reforms
A decade ago Indian banks were buried under bad loans — gross non-performing assets (NPAs) peaked at 11.2% in 2018. A series of reforms turned it around: the Insolvency and Bankruptcy Code (2016) created a time-bound process to resolve defaulting companies, public-sector banks were recapitalised and merged from 27 into 12, and a 'bad bank' (NARCL) was set up. Gross NPAs fell to 2.2% by March 2025, a multi-decade low, and banks returned to record profits. The counter shows the gross NPA ratio.
2.2%
Gross NPA (March 2025), a multi-decade low
27 → 12
PSU banks after mergers
₹4.32 lakh cr
Realised via IBC resolution plans (to Mar 2026)
Gross bank NPA ratio (March 2018 → March 2025)
| Year | Gross bank NPA ratio |
|---|---|
| 2015 | 4.3 % |
| 2018 | 11.2 % |
| 2019 | 9.1 % |
| 2020 | 8.2 % |
| 2021 | 7.3 % |
| 2023 | 3.9 % |
| 2024 | 2.8 % |
| 2025 | 2.2 % |
| Dashed bars are years the source does not publish; the shape between published years is drawn, not measured. | |
2015
0.0%
Gross bank NPA ratio
20152025
Since 2015
Reduced
−2.1 %
2015
4.3 %
2025
2.2 %
Dashed bars are years the source does not publish; the shape between published years is drawn, not measured.
Why it matters Healthy banks can lend more for growth; the IBC also shifted the culture around defaulting — borrowers can now lose their company for not repaying.
- Gross NPA: 11.2% (March 2018 peak) → 2.2% (March 2025)
- IBC (2016); PSU banks merged 27 → 12; record bank profits
- Source: Reserve Bank of India
History
The turnaround
Gross NPAs fell to a multi-decade low of 2.2% by March 2025 and banks swung back to record profits. The IBC also changed borrower behaviour — promoters can now lose their company for not repaying — while UPI and digital lending widened access.
How it works
India's banking is anchored by big public-sector banks alongside strong private banks, all overseen by the RBI. The decade's central reform was cleaning up bad loans: the Insolvency and Bankruptcy Code (2016) created a single, time-bound, creditor-led process to resolve or liquidate defaulting companies — shifting power from defaulters to lenders. Weak public banks were also merged and recapitalised to make them stronger.
Outlook
The turnaround is real: banks' gross bad-loan ratio fell from a peak of 11.2% to 2.2% by March 2025 — a multi-decade low — and public-sector banks posted an all-time high net profit of ₹1.98 lakh crore in 2025-26, with their own gross NPA ratio down to 1.93%. The task now is to carry that discipline into the next credit cycle.
By the numbers
Gross NPA 11.2% (March 2018) → 2.2% (March 2025); PSU banks 27 → 12; IBC (2016); record profits (public-sector banks ₹1.98 lakh crore, 2025-26). Source: RBI; Ministry of Finance via PIB.
Data current to: end-March 2025
Source: RBI data — gross NPA ratio of scheduled commercial banks (% of gross advances), end-March, 2015–2025. RBI: 8.2% (2020), 7.3% (2021), 3.9% (2023), 2.8% (2024) and 2.2% (2025); Ministry of Finance: 4.28% (2015), 11.18% (2018, the peak) and 9.07% (2019). PIB, December 2025: 11.18% in March 2018 to 2.2% in March 2025, and 27 public-sector banks consolidated into 12 (linked). No readable official figure was found for 2016, 2017, 2022 or all banks in March 2026; public-sector banks alone were at 1.93% on 31 March 2026. · link