Banks wrote off 33.2% of bad loans worth at least Rs 1.28 lakh crore in FY26, with private sector lenders taking a bigger share.

Private banks wrote off 49.7% of their gross non-performing assets (NPAs) compared with 24.3% for public sector banks, the Reserve Bank of India's Financial Stability Report showed. 

The higher write-off ratio at private banks is despite public sector lenders holding majority of bad loans in the banking system. Public sector banks held 63.2% of the sector's gross NPAs as of 31 March 2026, while accounting for 54.4% of total advances.

According to the RBI report, write-offs remained an important tool for cleaning up bank balance sheets over the past six years, helping bring the gross NPA ratio down to a multi-decade low of 1.8%, or Rs 3.85 lakh crore, by the end of March 2026. The ratio stood at 7.3% in March 2021 and 9.6% in March 2017.

Government data presented in the Lok Sabha showed public sector banks wrote off Rs 5.81 lakh crore of loans between 2020-21 and 2024-25, compared with Rs 3.09 lakh crore by private banks during the same period.

There is another long-term shift which has taken place. As per the June quarter numbers, private lenders have steadily increased their share of system deposits over the past decade. Public sector banks have gradually ceded ground, even as they continue to dominate the stock of bad loans.

While private sector banks reported 14.3% year-on-year growth in deposits during the June quarter, public sector lenders posted 10.7% growth.

Credit growth, however, told a different story. The loan book of public sector banks expanded 16.4% from a year earlier, compared with 15.9% for private banks.

With deposit mobilisation slowing, the aggregate loan-to-deposit ratio for public sector banks has pushed to 81% from 77% a year ago. In case of private banks, the ratio also rose, but only marginally, to 92% from 91%.