However, individually, many banks have reduced their NPAs over this period. This reducing in their net NPAs has been brought about by virtue of provisions and not by cautious lending and monitoring of loan accounts.

The asset quality of public sector banks is approaching its peak as the system-wide net NPA ratio is below 1 per cent. As compared to 14 banks in FY06-07, twenty PSBs now have less than 1 per cent net NPA. This is due to effective recovery measures, lower delinquency levels and higher provision coverage ratios. The gross NPAs, however, remain to be a cause of worry.

Among PSBs, Andhra Bank has one of the best-managed credit portfolios. It has credible net NPAs to advances of 0.15 per cent, which is the lowest amongst its peers. The bank also continues to have a healthy assets profile and a strong capital base.

United Bank of India, IDBI Bank, Central Bank, State Bank of India and UCO Bank have NPAs between 1 and 2 per cent. Dena Bank has seen a tremendous improvement, having reduced its net NPAs by 210 bps to 0.94 per cent from 3.04 per cent in 2005-06.

However, Oriental Bank of Commerce's net NPAs, as a per cent of net advances, has gone up by 50 bps from 0.49 per cent to 0.99 per cent at the end of March 2008. But, the good news for the bank is that it remains below 1 percent.

The largest public sector lender, SBI, has seen an increase in the net NPAs by a whopping 41 percent. Their net NPAs increased by Rs 2,167 crore to Rs 7,424 crore in FY 08. The net NPAs to net advances of SBI and SBI group stood at 1.78 per cent and 1.43 per cent respectively in 2007-08.