PSBs are stepping up their game in credit underwriting, resulting in fewer slippages

PSBs have increased lending control and close monitoring of repayments, minimizing deterioration in asset quality | Photo credit: iStockphoto

This is confirmed by the central bank’s data for the past three years and the latest statement from the Minister of Finance of the Ministry of Financial Services.

During the last three financial years, total additions to non-performing assets (NPAs) have been between 18 percent and 24 percent of the opening NPA balance in the case of PSBs.

In sharp contrast, total NPA additions in the case of PvSBs ranged from 61 percent to 93 percent of the NPA opening balance.

What this means is that the PSBs have exercised better control over lending and kept a close eye on repayments, thereby minimizing deterioration in asset quality.

Outpacing the industry

Nagaraju M, Secretary, Department of Financial Services (DFS), in a recent address at the 78th Annual General Meeting of the Indian Banks’ Association, highlighted that PSBs are outpacing the banking sector in terms of record low NPA levels, robust profitability and strengthening 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 side of the balance sheet (assets) to the right side (liabilities/deposit mobilization).

Based on RBI data for the last three years, the decline in NPAs for PSBs has been higher than new slippages, averaging around 40 percent of the opening balance.

However, in the case of the PvSBs, the reduction in NPAs has more or less kept pace with fresh slippages, indicating that they are willing to take a slap on the chin via write-offs and continue lending.

“Over the past three years, slippage has been visible in private sector banks as evidenced by new data on NPA accretion. This could possibly be due to factors including the exponential growth of unsecured loans in the post-corona crisis years. However, these banks have managed to keep outstanding gross NPAs in check through timely action of close monitoring, recovery and upgrades, besides selling these NPAs to Asset Recovery Companies (ARCs),” Hari said Hara Mishra, CEO of the Association of ARCs in India.

He emphasized that a healthy balance sheet and control over slippages unlock the banks’ growth potential, which attracts investors and commands a market premium.

Published on February 22, 2026