A Study on NPA Dynamics and Recovery Strategies in Indian PSBs

Abstract

This research paper delves into the Non-Performing Asset (NPA) trends of five major public sector banks in India: Bank of India (BOI), Central Bank of India (CBI), Indian Overseas Bank (IOB), State Bank of India (SBI), and UCO Bank over the period from 2014 to till date. Through quantitative analysis of financial statements and qualitative reviews of policy shifts, economic factors, and regulatory interventions, this study evaluates the magnitude, causes, and outcomes of NPAs. It offers a comprehensive understanding of sectoral risk, credit quality, and recovery mechanisms employed by these banks to address asset stress.

Introduction

The banking sector’s health is vital for economic stability, and NPAs pose a significant challenge to Indian public sector banks (PSBs). This study focuses on five PSBs—Bank of India (BOI), Central Bank of India (CBI), Indian Overseas Bank (IOB), State Bank of India (SBI), and UCO Bank—analyzing their NPA trends from 2014 to present.

Key Concepts:

• NPAs are loans overdue by 90+ days, categorized as Sub-standard, Doubtful, or Loss Assets.

• Gross NPA is the total NPAs; Net NPA deducts provisions, reflecting actual losses.

• Provisioning Coverage Ratio (PCR) measures provisions made against NPAs, indicating financial resilience.

• Asset Quality Review (AQR) (introduced in 2015) exposed hidden stressed assets, leading to a spike in reported NPAs.

Influencing Factors:

NPAs are driven by macroeconomic slowdown, sector-specific stress (infrastructure, steel, power, telecom), poor corporate governance, regulatory gaps, and shocks like demonetization and COVID-19.

Literature Review:

• Studies emphasize technology adoption, regulatory reforms (like EASE, IBC), and policy interventions.

• Highlight persistent structural weaknesses in credit appraisal, governance, and sector-specific stress.

• Note gaps in longitudinal and institution-specific NPA analysis, particularly post-AQR reforms and COVID-19 impacts.

Research Objectives:

1. Analyze year-wise Gross and Net NPA trends in the five PSBs.

2. Assess provisioning and recovery effectiveness.

3. Compare NPA management across these banks.

4. Explore long-term COVID-19 impact and policy outcomes.

Methodology:

• Data from banks’ annual reports, RBI reports, and consultancy analyses.

• Time-series and comparative analysis from FY2013-14 to FY2024-25.

• Use of key ratios, recovery data, and provisioning trends.

Findings:

• NPA Trends: NPAs rose sharply post-2014, peaking around 2016–2018 after AQR exposed hidden stress. CBI, BOI, IOB, and UCO had double-digit Gross NPAs in 2018; SBI consistently maintained lower levels.

• Recovery: From 2019 onwards, all banks show steady decline in NPAs, reflecting improved recovery and regulatory measures.

• Provisioning: PCR improved steadily, with SBI leading in prudent provisioning (from ~63% in 2014 to 82% in 2025).

• Recoveries: Recoveries under AUCA increased significantly across all banks, with SBI leading (?600 crore in 2014 to ?1345 crore in 2025), supported by reforms like IBC and efficient legal processes.

Gaps and Limitations:

• Limited studies on comparative, longitudinal bank-specific NPA data.

• Insufficient focus on post-AQR and COVID recovery impacts.

• Data availability constraints for recent years.

Conclusion

The study underscores the critical role of regulatory reforms, better provisioning, and improved recovery mechanisms in mitigating NPAs in PSBs. SBI outperforms peers in asset quality and recovery. Continued focus on governance, technology, and sector-specific stress is essential for sustained banking health.

References

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Copyright

Copyright © 2025 Mr. Sangram Padhy, Dr. (Mrs.) Rashmita Sahoo. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.