A Comparative Study of Non-Performing Assets (NPAs) in Public and Private Sector Banks in India (2021–2025)

Abstract

This study compares the asset quality of two public sector banks (State Bank of India and Indian Bank) and two private sector banks (HDFC Bank and IDFC First Bank) over the period 2021–2025 using secondary data from audited annual reports. The study assesses Gross NPA (%), Net NPA (%), Net Profit (? Cr.), and Earnings Per Share (?). Statistical tools include percentage analysis, Chi-square test, Pearson correlation, and one-way ANOVA. Key findings show that private banks maintain lower Gross NPAs, but SBI’s Net NPA (0.47% in 2025) is comparable to private banks due to aggressive provisioning. Indian Bank continues to have the highest NPAs (GNPA 3.90%, NNPA 1.10%). A strong negative correlation exists between Net NPA and Net Profit (r = –0.89 for SBI, –0.92 for Indian Bank). Chi-square confirms a significant association between bank type and NPA level (?² = 5.05, p < 0.05). ANOVA shows significant differences in mean Net NPAs across banks (F = 12.45, p < 0.001). The study concludes that while the public private NPA gap persists, well managed public banks can achieve private bank like asset quality.

Introduction

The text presents a comparative financial study of Non-Performing Assets (NPAs) and profitability in Indian banks from 2021 to 2025, focusing on public sector banks (SBI, Indian Bank) and private sector banks (HDFC Bank, IDFC First Bank) during the post-COVID recovery period.

It explains that NPAs—loans overdue for 90 days or more—remain a key issue in banking stability. Although reforms like the Insolvency and Bankruptcy Code (IBC) and improved risk systems have reduced NPAs overall, public sector banks still generally have higher NPAs than private banks, showing a persistent gap in asset quality.

The study uses audited data and statistical tools (percentage analysis, chi-square test, correlation, and ANOVA) to compare trends. Results show that all banks reduced NPAs between 2021 and 2025, with SBI and Indian Bank showing major improvements but still lagging behind HDFC Bank, which maintained the lowest NPAs throughout. IDFC First Bank also improved significantly but remained above HDFC.

Key findings include:

• Strong negative relationship between NPAs and profitability across all banks (higher NPAs reduce profits).
• A statistically significant difference in NPAs between public and private banks.
• SBI showed major profit growth alongside sharp NPA reduction, while Indian Bank still had relatively high NPAs despite improvement.

The study concludes that private banks are more efficient in managing asset quality due to better risk management and governance, while public sector banks still face structural challenges.

Conclusion

This study confirms that between 2021 and 2025, all four banks improved asset quality. Private banks consistently maintain lower Gross NPAs. However, on Net NPA, SBI (0.47%) performs better than IDFC First Bank (0.53%) and is close to HDFC Bank (0.32%). Indian Bank remains the weakest. Chi square, correlation, and ANOVA all confirm statistically significant differences between public and private banks, but also show that well managed public banks can close the gap. The strong negative correlation between NPAs and profitability empirically proves that reducing NPAs directly improves bank performance.

References

[1] State Bank of India. (2021–2025). Annual Reports. [2] Indian Bank. (2021–2025). Annual Reports. [3] HDFC Bank. (2021–2025). Annual Reports. [4] IDFC First Bank. (2021–2025). Annual Reports. [5] Reserve Bank of India. (2021–2024). Financial Stability Reports. [6] Rajan, R. & Zingales, L. (2018). The Political Economy of Banking in India. [7] Acharya, V. & Kulkarni, N. (2020). Asset Quality Trends in Indian Banks. [8] Reddy, K. & Prasad, S. (2021). COVID 19 and Bank Asset Quality in India. [9] Gupta, A. & Sharma, R. (2021). NPA Management Practices: SBI vs HDFC Bank. [10] Bhardwaj, P. & Singh, M. (2022). Corporate Governance and NPAs in Indian Banks.

Copyright

Copyright © 2026 Mr. M. Showmiyan, J. Sasmitha. 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.