Banking Reforms, Asset Quality and Financial Stability: A Comparative Study of State Bank of India and the Punjab National Bank

Non-performing assets are posing a serious challenge to the sustainability and profitability of Indian banks. This study examines the impact of major regulatory reforms on asset quality performance in two major public sector banks, State Bank of India and Punjab National Bank , over the period 2015–2025. This study assesses the effectiveness of key policy measures, such as Asset Quality Review, the Insolvency and Bankruptcy Code, recapitalization measures, EASE reform, and governance improvements, to reduce distressed assets. This study is based on secondary data collected from annual reports of SBI and PNB, records of the Bank of India, financial stability data and government records. Analytical techniques such as trend analysis, quantitative analysis, correlation analysis, statistical description, correlation analysis, and hypothesis analysis were used to analyze variables in non-performance, non-performing assets, Provision Coverage Ratio, and Capital Adequacy Ratio. The findings indicate that both banks experienced a significant increase in NPAs after the implementation of asset quality control due to the stringent identification of stressed assets. Subsequent developments, however, greatly improved performance. SBI reduced its GNPA ratio from the 10.91% level to 2.24%, while PNB reduced its GNPA from 14.10% to 5.70%. The results further show that there is a strong negative relationship between NPA levels and profitability indicators. SBI has shown strong recovery performance and great resilience, thanks to diversified lending practices, governance mechanisms, risk management, and technology integration. This study concludes that regulatory reform plays an important role in improving asset quality and financial stability in Indian banks. These findings provide important insights for policy makers and banks interested in improving credit risk management and enhancing the longterm resilience of banks.