Post-Pandemic Dynamics of Non-Performing Assets in Indian Public Sector Banks (2020–2025): An Empirical Assessment Using Panel Econometric Modeling

The stability of the Indian banking system is critically influenced by asset quality, particularly in Public Sector Banks (PSBs) that serve as major agents of credit intermediation. The COVID-19 pandemic introduced unprecedented credit risk pressures, prompting regulatory interventions aimed at safeguarding financial stability. Against this backdrop, the present study analyzes the post-pandemic dynamics of Non-Performing Assets (NPAs) in Indian PSBs during the period 2020–2025 and examines their implications for profitability, capital adequacy, and credit growth. Using a balanced panel dataset comprising ten PSBs over six financial years, the study employs panel econometric techniques including unit root tests, Fixed and Random Effects models, and Hausman specification diagnostics. Asset quality indicators such as Gross NPA and Net NPA ratios are linked with key performance variables including Return on Assets (ROA), Capital to Risk-Weighted Assets Ratio (CRAR), Provision Coverage Ratio (PCR), and credit growth rates. The empirical findings indicate a significant reduction in both Gross and Net NPAs during the post-pandemic phase, supported by higher provisioning and regulatory oversight. The regression results reveal that NPAs exert a negative and statistically significant influence on profitability, while PCR demonstrates a positive association with capital adequacy. Further, cleaner balance sheets, reflected by lower Net NPA levels, correspond with improved credit growth. These findings highlight the role of provisioning discipline, capital reinforcement, and NPA resolution mechanisms in enabling PSBs to transition from balance sheet repair to credit expansion during the recovery period. The study provides relevant insights for policymakers, regulators, and bank management in framing post-crisis banking strategies.