UPSC Prelims Practice Questions — ASSET QUALITY OF SCHEDULED COMMERCIAL BANKS (SCBs) WITNESSES SIGNIFICANT IMPROVEMENT, RECOVERY RATE IN NPAs APPROXIMATELY DOUBLES FROM 13.2 PER CENT IN FY18 TO 26.2 PER CENT IN FY25

Q1. Debt Recovery Tribunals (DRTs), one of the statutory channels for recovery of banks' non-performing assets, derive their authority from which one of the following?

  • A. Recovery of Debts Due to Banks and Financial Institutions Act, 1993
  • B. Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002
  • C. Insolvency and Bankruptcy Code, 2016
  • D. Banking Regulation Act, 1949

Q2. According to the Economic Survey 2025-26, the recovery rate in NPAs of Scheduled Commercial Banks, which stood at 13.2 per cent in FY18, rose to approximately what level in FY25?

  • A. 21.5 per cent
  • B. 24.0 per cent
  • C. 26.2 per cent
  • D. 31.0 per cent

Q3. With reference to the asset quality and capital position of Scheduled Commercial Banks as reported for 2025, consider the following statements: 1. The gross NPA ratio of SCBs (domestic operations) touched a historic low of 2.15 per cent as of September 2025. 2. The Capital to Risk-weighted Assets Ratio (CRAR) of SCBs stood at 17.2 per cent as of September 2025. 3. The September 2025 gross NPA level was lower than the 2010-11 level. 4. Over FY18 to FY25, the recovery rate in NPAs of SCBs fell from 26.2 per cent to 13.2 per cent. Which of the statements given above are correct?

  1. The gross NPA ratio of SCBs (domestic operations) touched a historic low of 2.15 per cent as of September 2025.
  2. The Capital to Risk-weighted Assets Ratio (CRAR) of SCBs stood at 17.2 per cent as of September 2025.
  3. The September 2025 gross NPA level was lower than the 2010-11 level.
  4. Over FY18 to FY25, the recovery rate in NPAs of SCBs fell from 26.2 per cent to 13.2 per cent.
  • A. 1, 2 and 3 only
  • B. 1 and 2 only
  • C. 2, 3 and 4 only
  • D. 1, 2, 3 and 4

Q4. With reference to the trajectory of asset quality and capital adequacy of Scheduled Commercial Banks, consider the following statements: 1. The gross NPA ratio of SCBs peaked at around 11 per cent by FY18 before beginning to decline. 2. The gross NPA ratio of SCBs declined from 9.11 per cent in March 2021 to 2.58 per cent in March 2025. 3. The net NPA ratio of SCBs reached a record low level alongside the improvement in gross NPAs. 4. The 17.2 per cent figure reported for September 2025 is the minimum CRAR mandated for banks under the Basel III norms. Which of the statements given above is/are NOT correct?

  1. The gross NPA ratio of SCBs peaked at around 11 per cent by FY18 before beginning to decline.
  2. The gross NPA ratio of SCBs declined from 9.11 per cent in March 2021 to 2.58 per cent in March 2025.
  3. The net NPA ratio of SCBs reached a record low level alongside the improvement in gross NPAs.
  4. The 17.2 per cent figure reported for September 2025 is the minimum CRAR mandated for banks under the Basel III norms.
  • A. 4 only
  • B. 1 and 3 only
  • C. 2 and 4 only
  • D. 3 only

Q5. Which one of the following bodies is the statutory regulator that oversees the implementation of the Insolvency and Bankruptcy Code, 2016?

  • A. Insolvency and Bankruptcy Board of India (IBBI)
  • B. National Company Law Tribunal (NCLT)
  • C. Securities and Exchange Board of India (SEBI)
  • D. Department of Financial Services (DFS), Ministry of Finance

Q6. As of March 2025, approximately how many companies had been rescued through resolution plans under the Insolvency and Bankruptcy Code, 2016?

  • A. About 480
  • B. About 870
  • C. About 1,194
  • D. About 2,430

Q7. The Asset Quality Review (AQR) of 2015, which forced transparent recognition of banks' stressed assets as NPAs, was initiated by which one of the following?

  • A. The Reserve Bank of India (RBI)
  • B. The Department of Financial Services, Ministry of Finance
  • C. The Insolvency and Bankruptcy Board of India (IBBI)
  • D. The Securities and Exchange Board of India (SEBI)

Q8. With reference to the Asset Quality Review (AQR) and the 4R's strategy for tackling banks' stressed assets, consider the following statements: 1. Unlike the earlier restructuring flexibility, the AQR required banks to classify stressed exposures as NPAs rather than continue rolling them over. 2. The AQR was initiated in 2015 during the tenure of RBI Governor Raghuram Rajan. 3. In the 4R's strategy, 'Recapitalisation' refers to the RBI infusing equity capital into private sector banks. Which of the statements given above is/are correct?

  1. Unlike the earlier restructuring flexibility, the AQR required banks to classify stressed exposures as NPAs rather than continue rolling them over.
  2. The AQR was initiated in 2015 during the tenure of RBI Governor Raghuram Rajan.
  3. In the 4R's strategy, 'Recapitalisation' refers to the RBI infusing equity capital into private sector banks.
  • A. 1 and 2 only
  • B. 1 and 3 only
  • C. 2 and 3 only
  • D. 1, 2 and 3

Q9. After the mega consolidation of Public Sector Banks (PSBs) effective 1 April 2020, which one of the following is the largest Public Sector Bank in India?

  • A. State Bank of India
  • B. Punjab National Bank
  • C. Bank of Baroda
  • D. Canara Bank

Q10. With reference to the regulatory and institutional architecture governing bank asset quality in India, consider the following statements: 1. The Reserve Bank of India regulates banking companies under the Banking Regulation Act, 1949. 2. The Insolvency and Bankruptcy Board of India oversees the framework established under the IBC, 2016. 3. Section 35AA of the Banking Regulation Act empowers the RBI, upon authorisation by the Central Government, to direct banks to initiate insolvency proceedings under the IBC. 4. The Department of Financial Services, which exercises ownership functions over PSBs, operates under the Ministry of Corporate Affairs. Which of the statements given above are correctly identified?

  1. The Reserve Bank of India regulates banking companies under the Banking Regulation Act, 1949.
  2. The Insolvency and Bankruptcy Board of India oversees the framework established under the IBC, 2016.
  3. Section 35AA of the Banking Regulation Act empowers the RBI, upon authorisation by the Central Government, to direct banks to initiate insolvency proceedings under the IBC.
  4. The Department of Financial Services, which exercises ownership functions over PSBs, operates under the Ministry of Corporate Affairs.
  • A. 1, 2 and 3 only
  • B. 1 and 2 only
  • C. 2, 3 and 4 only
  • D. 1, 2, 3 and 4

Q11. The Economic Survey 2025-26 highlighted the deepening of financial inclusion through a flagship scheme that alone accounted for 55.02 crore bank accounts. Which one of the following is that scheme?

  • A. Pradhan Mantri Jan Dhan Yojana (PMJDY)
  • B. Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
  • C. Atal Pension Yojana (APY)
  • D. Stand-Up India Scheme

Q12. According to the Economic Survey 2025-26, Regional Rural Banks (RRBs) achieved a record consolidated net profit of approximately how much during FY24?

  • A. ₹4.5 thousand crore
  • B. ₹6.8 thousand crore
  • C. ₹7.6 thousand crore
  • D. ₹9.2 thousand crore