Bad Assets of Banks Decline to Multi-Year Low of 0.8% in September: RBI Report

Ira Singh
Khabar Khabaron Ki,28 Dec’23

The Reserve Bank of India (RBI) on Thursday reportedly said that the net non- performing assets (NPAs) ratio of banks in the country has reached a multi-year low, of 0.8% at the end of September 2023 and reflects a strengthened financial position for banks and underscores the resilience of India’s domestic financial system.

‘The resilience of the non-banking financial companies (NBFCs) sector improved with capital to risk-weighted assets ratio(CRAR) at 27.6 per cent, GNPA ratio at 4.6 per cent and return on assets (RoA) at 2.9 per cent, respectively, in September 2023,’ said the RBI’s Financial Stability Report (FSR).The gross non-performing assets (GNPA) ratio of Indian banks also declined to a multi-year low of 3.2 percent,stated report.

The report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the Indian financial system.It further said that the capital to risk-weighted assets ratio (CRAR) and the common equity tier 1 (CET1) ratio of scheduled commercial banks (SCBS) stood at 16.8 per cent and 13.7 per cent, respectively, in September 2023.

‘Macro stress tests for credit risk reveal that SCBs would be able to comply with minimum capital requirements, with the system-level CRAR in September 2024 projected at 14.8 per cent, 13.5 per cent and 12.2 per cent, respectively, under baseline, medium and severe stress scenarios,’ the report said

Referring to the present state of Indian economy, it said the domestic financial system remained resilient, supported by strong macroeconomic fundamentals, healthy balance sheets of financial institutions, moderating inflation, improving external sector position and continuing fiscal consolidation.However, the global economy faces multiple challenges, including prospects of slowing growth, large public debt, increasing economic fragmentation, and prolonging geopolitical conflicts.The latest data released by the RBI highlights a substantial decline in the net NPAs ratio from previous periods, showcasing a robust turnaround in the asset quality of banks. The consistent efforts and prudent strategies implemented by financial institutions appear to have yielded commendable results, significantly enhancing the health of the banking sector.