Asset quality of Indian banks improves to decadal high: RBI
The Hindu
GNPA ratio of Indian SCBs drops to decadal low; balance sheet of UCBs & NBFCs expand; resilience of banking sector lauded.
The Gross Non-Performing Assets (GNPA) ratio of Indian scheduled commercial banks (SCBs) went on improving in the second quarter of this financial year, dropping to a fresh decadal low, according to the Reserve Bank of India’s (RBI’s) report titled ‘Trend and Progress of Banking in India’.
“The improvement in asset quality, measured by GNPA ratios, that began in 2018-19 continued during 2022-23. The GNPA ratio of SCBs fell to a decadal low of 3.9% at end-March 2023 and further to 3.2% at end-September 2023,” the RBI said in the report which was released on Wednesday.
During 2022-23, about 45% of reduction in GNPAs of SCBs was contributed by recoveries and upgradations, it added.
As per the report, the consolidated balance sheet of SCBs (excluding Regional Rural Banks) grew by 12.2% in 2022-23, the highest in nine years. “The main driver of this growth on the asset side was bank credit, which recorded its fastest pace of expansion in more than a decade,” the central bank said.
It said during 2022-23, the combined balance sheets of commercial banks expanded in double digits, driven by sustained credit growth. Higher lending rates and lower provisioning requirements helped improve the profitability of banks and shored up their capital positions, it added. The capital to risk weighted assets ratio (CRAR) of SCBs was 16.8% at end-September 2023, with all bank groups meeting the regulatory minimum requirement and the common equity tier 1 (CET1) ratio requirement.
The combined balance sheet of urban co-operative banks (UCBs) expanded by 2.3% in 2022-23, driven by loans and advances. Their capital buffers and profitability improved through 2022-23 and Q1:2023-24, the RBI said.
According to the report the consolidated balance sheet of non-banking financial companies (NBFCs) expanded by 14.8% in 2022-23, led by double digit credit growth.
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