The banking sector is in a strong condition, Gross NPA has come below 3% for the first time since 2012
According to the latest report released by the Reserve Bank, Gross NPA has come below 3% for the first time since 2012 and it is currently 2.8%.
The Reserve Bank of India (RBI) has said in a report that the Indian economy and financial system remain strong and resilient as the gross non-performing assets (GNPA) ratio has come down to a multi-year low of 2.8 percent at the end of March 2024. Releasing the June Financial Stability Report (FSR) on Thursday, RBI said that the GNPA ratio of scheduled commercial banks came down to a multi-year low of 2.8 percent, while the net non-performing asset (NNPA) ratio stood at 0.6 percent at the end of March 2024.
The balance sheet has improved
According to the report, "The Indian economy and financial system remain strong and resilient, supported by macroeconomic and financial stability. Banks and financial institutions with improved balance sheets are supporting economic activity through continued credit expansion." The report says that the capital-to-risk-weighted assets ratio (CRAR) and the common equity tier 1 (CET 1) ratio of scheduled commercial banks (SCBs) stood at 16.8 percent and 13.9 per cent respectively at the end of March.
Commercial banks in a strong position
According to the FSR report, comprehensive stress tests for credit risk show that commercial banks will be able to comply with the minimum capital requirements. Systemic CRAR at the end of the financial year is estimated to be 16.1 per cent, 14.4 per cent and 13.0 per cent respectively under baseline, medium and severe stress scenarios. The report says that these scenarios are strict conservative assessments made under hypothetical shocks and the results should not be interpreted as forecasts.
Financial health of NBFCs is good
The Reserve Bank report says that the health of non-banking financial companies (NBFCs) remained healthy at the end of March 2024. Their CRAR was 26.6 per cent, GNPA ratio was 4.0 per cent and return on assets (ROA) was 3.3 per cent. In the context of the global economy, the report says that it is facing increased risks from long-running geopolitical tensions, increased public debt and slow pace of decline in inflation. However, the FSR report says that despite these challenges, the global financial system remains combative and financial conditions are stable.
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