Economic Survey 2025-26 Highlights: Improved Asset Quality in Scheduled Commercial Banks

The Economic Survey 2025-26, presented in Parliament today by Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman, highlights a marked improvement in the asset quality of Scheduled Commercial Banks (SCBs). The gross non-performing asset (GNPA) ratio has reached a multi-decade low, while the net NPA ratio has hit a record low. SCBs continue to maintain strong capital buffers, with the capital-to-risk-weighted-assets ratio (CRAR) at 17.2% as of September 2025.

NPAs Recovery Rate Doubled Over 7 Years

The recovery rate of NPAs has nearly doubled over the last seven years, rising from 13.2% in FY18 to 26.2% in FY25. Recovery through the Insolvency and Bankruptcy Code (IBC), 2016, has also improved significantly, reflecting stronger enforcement and resolution mechanisms.

Measures announced in the Union Budget 2025-26, such as enhanced credit availability with guarantee cover for MSMEs, the introduction of credit cards for micro-enterprises, and other reforms, have further supported growth in the sector. The reclassification of MSMEs, with higher investment limits and turnover thresholds, has also contributed to robust credit growth. Bank lending to MSMEs continues to demonstrate strong momentum.

Regional Rural Banks: Consolidation and Performance

The Economic Survey notes that several steps were taken to optimize resources and enhance the performance of Regional Rural Banks (RRBs). These included a four-phase consolidation under the “One-State-One-RRB” principle, reducing their number from 196 to 28 as of May 1, 2025.

Additionally, the integration of Core Banking Solutions and IT systems across amalgamated RRBs into unified platforms has improved operational efficiency. These measures have significantly strengthened the financial health of RRBs. During FY24, RRBs reported a record consolidated net profit of ₹7.6 thousand crore, followed by ₹6.8 thousand crore in FY25.

Also Read: Economic Survey 2025-26: India Among Top Global Destinations for Private Infrastructure Investment

RRBs have consistently exceeded the priority sector lending target of 75% of their adjusted net bank credit, demonstrating their continued commitment to their foundational objectives.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.