What is the current status of bad loans in Indian banks as of September 2025?

Gross non-performing assets (GNPAs) for Indian banks have fallen to a decadal low of 2.1% as of end-September 2025.

Which sector in Indian banking poses a concern despite overall asset quality improvement?

Unsecured retail lending remains a concern, with its SMA-2 ratio at 13% as of September 2025.

How is the MSME sector performing in terms of asset quality in India?

The MSME sector shows improved asset quality, with its SMA ratio steady at 5.1% as of end-September 2025.

Home / Business and Economy / Indian Banks' Bad Loans Hit Decade Low Amid Concerns

Indian Banks' Bad Loans Hit Decade Low Amid Concerns

5 Jan

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Summary

Gross NPAs fell to a decadal low of 2.1% by September 2025.
SMA-2 ratio for unsecured retail lending remains a concern at 13%.
MSME sector shows improved asset quality with a 5.1% SMA ratio.

Indian Banks' Bad Loans Hit Decade Low Amid Concerns

Asset quality across India's banking system has seen notable improvement, with gross non-performing assets (GNPAs) declining to a decadal low of 2.1% as of end-September 2025. Data from the Reserve Bank of India indicates a reduction in stressed assets across various borrower segments. The special mention accounts overdue by 61-90 days (SMA-2) for Micro, Small, and Medium Enterprises (MSMEs) eased to 5.1%, suggesting a healthier financial standing for this sector.

Despite the overall positive trend, unsecured retail lending remains an area requiring close attention. While stress in this segment has moderated from over 20% to 13% (SMA-2 ratio) compared to a year prior, it still represents a potential risk. Fresh stress formation among large borrowers has also improved, with their SMA-2 ratio declining substantially, reversing a previous increase.