Sector-wise Composition and Evolving Structure of Non-Performing Assets in Indian Public Sector Banks: A Phase-wise Analysis (2003–2025)

Non-Performing Assets (NPAs), Public Sector Banks, Priority Sector NPAs, Non-Priority Sector NPAs, Asset Quality Review

This research analyses the evolution of the sector-wise composition of Non-Performing Assets (NPAs) of Indian Public Sector Banks between 2003 and 2025. While most past research on NPAs focused on determining the factors responsible for the level of NPAs in the Public Sector Banks of India, relatively less research has been conducted about the evolution of the composition of NPAs across sectors. This research employs secondary data from various publications of the Reserve Bank of India. Tools such as descriptive statistics, trend analysis, percentage composition analysis, descriptive correlation analysis, and the output of a simple OLS regression are employed in the analysis of the trends in the sector-wise composition of NPAs. The data analysis reveals the significant changes in the composition of NPAs in various stages of the Public Sector Banks of India. The Priority Sector NPAs comprise a considerably higher percentage of NPAs in the early stage of the banks as compared to the Non-Priority Sector NPAs that dominate the composition of NPAs of these banks in the stage of corporate stress after 2014. The observations of the NPAs of Public Sector Banks after 2023 also suggest hints of the changing composition of NPAs according to sectors in these banks. The findings of this study highlight the changing pattern of stress in the Indian banking industry and the need for a sector-wise approach to the management of credit risk of the Public Sector Banks of India regarding the corporations, the agriculture sector, and the MSMEs.