PSBs power ahead of pvt peers in war on bad loans

India's public sector lenders saw a sharp decline in bad assets in 2024-25, outpacing their private sector peers, which continued to add to their non-performing assets (NPA) pile amid rising stress in unsecured credit.

- Abirami Sekar

Data from Capitaline showed that public sector banks (PSBs) reported a drop in total bad assets—loans where repayments are overdue by over 90 days—in FY25 and FY24. Bad loans of PSBs decreased 16% year-on-year (y-o-y) to ₹2.84 trillion in FY25, from ₹3.4 trillion in FY24 and ₹4.3 trillion in FY23. In comparison, private banks saw an increase in bad loans by around 2.9% to ₹1.29 trillion in FY25, up from ₹1.26 trillion in FY24 and ₹1.22 trillion in FY23.

The analysis covered 19 private sector banks and 12 public sector banks.

"Public sector banks not only saw a decline in absolute fresh slippages but also continued to witness healthy recoveries and upgrades," said Sachin Sachdeva, vice-president and sector head of financial sector ratings at Icra Ltd.

Given their healthy operating profitability, public sector banks were able to maintain higher write-offs, according to Sachdeva.