PSBs have been exercising better control on loan sourcing and keeping a close eye on repayments, minimising asset quality deterioration in the process
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Public sector banks (PSBs) have upped their game on credit underwriting front, stemming fresh slippages, whereas private sector banks (PvSBs) appear to be lagging in this area.
This is borne out by the Central bank data for the last three years and Department of Financial Services Secretary’s latest statement.
During the last three financial years, overall non-performing asset (NPA) additions ranged between 18 per cent and 24 per cent of the NPA opening balance in the case of PSBs.
In sharp contrast, in the case of PvSBs, overall NPA additions ranged from 61 per cent to 93 per cent of the NPA opening balance.
What this means is that PSBs have been exercising better control on loan sourcing and keeping a close eye on repayments, minimising asset quality deterioration in the process.
Surpassing industry
Nagaraju M, Secretary, Department of Financial Services (DFS), in a recent speech at the Indian Banks’ Association’s 78th annual general meeting, highlighted that PSBs have been outpacing the banking industry in terms of record low NPA levels, robust profitability and strengthening of the capital base with each passing quarter.
One of the experts assisting the government and IBA with the EASE (Enhanced Access and Service Excellence) agenda noted that PSBs have overcome asset quality challenges and their focus has shifted from the left hand side of the balance sheet (assets) to the right hand side (liabilities/deposit mobilisation).
Based on RBI data for the last three years, reduction in NPAs for PSBs has been higher than fresh slippages, averaging about 40 per cent of the opening balance.
However, in the case of PvSBs, reduction in NPAs has more or less kept pace with fresh slippages, indicating their willingness to take a hit on the chin via write-offs and move on with the lending business.
“Slippages in private sector banks are visible in the last three years, going by fresh NPA accretion data. This could possibly be due to exponential growth in unsecured loans in post-Covid years, amongst others. However, these banks have been able to contain outstanding gross NPAs through timely action of close monitoring, recovery and upgradation, in addition to sale of these NPAs to Asset Recovery Companies (ARCs),” said Hari Hara Mishra, CEO, Association of ARCs in India.
He emphasised that a healthy balance sheet and control over slippages unlocks growth potential of the banks, which attracts investors and command a market premium.
Published on February 22, 2026
