Non-Performing Asset Management in Indian Banking: A Conceptual Framework and Descriptive Evidence on Public and Private Sector Banks

Abstract

Non-performing assets (NPAs) shape credit supply, profitability and financial stability in India’s banking system. This conceptual paper, supported by descriptive empirical evidence, compares public sector banks (PSBs) with other scheduled commercial banks (SCBs) across the 2015 Asset Quality Review (AQR), the Insolvency and Bankruptcy Code (IBC), recapitalisation, and PSB consolidation. It combines (a) official gross NPA data at six dates from March 2015 to September 2025; (b) a purposive synthesis of 35 peer-reviewed studies; and (c) a specified, testable panel model linking governance, credit-risk management, profitability, credit intensity, digital adoption, reform and ownership to NPA ratios. The PSB gross NPA ratio rose from 4.97% in March 2015 to 14.58% in March 2018 and fell to 2.30% by September 2025; the derived ratio for the other banks rose from 2.28% to 4.49% and fell to 1.73%. The PSB ratio fell by about 84% against about 61%, the PSB share of system gross NPAs fell from about 86% to about 63%, and the PSB-to-other-banks ratio narrowed from about 3.3 to about 1.3. The data are group aggregates at six dates and support descriptive, not causal, conclusions; the model is specified but not estimated. Convergence has been substantial, and a small gap remains.