Metric Explainer: GNPA & NNPA
GNPA (Gross NPA Ratio) = what percentage of a bank's total loans have gone bad. NNPA (Net NPA Ratio) = bad loans minus provisions already set aside — the unc...
Simple definition
GNPA (Gross NPA Ratio) = what percentage of a bank's total loans have gone bad.
NNPA (Net NPA Ratio) = bad loans minus provisions already set aside — the uncovered risk.
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"GNPA = kitne paison ka loan phansa. NNPA = provision ke baad bhi kitna risk bacha."
Formulas
GNPA % = (Gross NPA Amount) / (Gross Advances) × 100
NNPA % = (Gross NPA - Provisions) / (Net Advances) × 100
What makes a loan an NPA?
Per RBI norms:
- Interest or principal payment overdue for > 90 days → classified as NPA
- Substandard (NPA for < 12 months) → Doubtful (> 12 months) → Loss
Good range
| GNPA % | Rating | Interpretation |
|---|---|---|
| < 1.5% | Excellent | Strong underwriting (HDFC Bank, Kotak) |
| 1.5–3% | Good | Adequate — most large private banks |
| 3–5% | Moderate | Watch closely, especially provisioning |
| 5–8% | High | Weak underwriting or stressed sector exposure |
| > 8% | Critical | Potential capital erosion |
| NNPA % | Rating |
|---|---|
| < 0.5% | Excellent — well provisioned |
| 0.5–1.5% | Good |
| 1.5–3% | Concerning — provisions not enough |
| > 3% | Dangerous — balance sheet at risk |
GNPA vs NNPA — why both matter
A bank with 7% GNPA but 0.5% NNPA has provisioned heavily — it has already absorbed the loss in its P&L. A bank with 3% GNPA and 2.5% NNPA has provisioned poorly — future earnings will take the hit.
Provision Coverage Ratio (PCR)
PCR = (Provisions for NPAs) / GNPA × 100
| PCR | Interpretation |
|---|---|
| > 75% | Well provisioned — most damage absorbed |
| 60–75% | Adequate |
| < 60% | Under-provisioned — more pain ahead |
Red flags
| Signal | Risk |
|---|---|
| GNPA declining but restructured loans rising | NPAs hidden through restructuring |
| Slippage ratio (fresh NPAs / opening standard advances) rising | New NPAs forming faster than old ones being resolved |
| GNPA concentration in one sector (e.g. power, infra) | Sector stress could suddenly worsen |
| NNPA rising even though GNPA is flat | Provisions being reversed to boost profit |
| Write-offs rising sharply | Bank cleaning book to show lower GNPA — check credit cost |
Evergreening
Some banks give fresh loans to stressed borrowers so they can repay old loans on time — making NPAs disappear artificially. This is called "evergreening." Watch for inexplicable drops in GNPA without corresponding recoveries or write-offs.
Real example: PSU Bank clean-up (2016-2023)
| Metric | FY16 (peak stress) | FY23 (post clean-up) |
|---|---|---|
| SBI GNPA | 6.5% | 2.8% |
| SBI NNPA | 3.8% | 0.7% |
| PNB GNPA | 12.9% | 6.5% |
| PNB NNPA | 8.6% | 2.7% |
| HDFC Bank GNPA | 1.0% | 1.2% |
| HDFC Bank NNPA | 0.3% | 0.3% |
PSU banks went through massive NPA recognition (RBI's AQR in 2015-16), provisioned heavily over 5 years, and came out cleaner. Private banks like HDFC Bank barely moved — their underwriting standards prevented the crisis.
Related metrics
- NIM — High NIM + high GNPA often go together (risky lending)
- Banking Sector Playbook — Framework for analyzing Indian banks
- NBFC Sector Playbook — Asset quality analysis for non-bank lenders