Decline in gross NPA ratio of commercial banks, may decline further, says RBI in Financial Stability Report

RBI governor Das has further added that stress test results further indicate an improvement in NPA ratio but its current level remains still high for comfort.

Indicating a recovery of the banking sector in the country, the RBI in its Financial Stability Report (FSR) has stated that the non-performing assets of commercial banks have declined in the current fiscal year and suggested that further improvement in banks’ asset quality would be made in the next fiscal.

The Reserve Bank of India today released the eighteenth issue of the biannual Financial Stability Report (FSR). Analysing the systemic risks in the financial system, the RBI has said that country’s financial system remains stable and the banking sector is expected to show the signs of improvement despite the change in the global economic environment and the other emerging trends in the financial sector.

The asset quality of banks showed an improvement with the gross non-performing assets (GNPA) ratio of SCBs declining from 11.5 per cent in March 2018 to 10.8 per cent in September 2018, RBI stated in its FSR. The RBI also expects a decline in GNPA ratio from 10.8 per cent in September 2018 to 10.3 per cent in March 2019.

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“After a prolonged period of stress, the banking sector appears to be on course to recovery as a load of impaired assets recedes; the first half-yearly decline in gross NPA ratio since September 2015 and improving provision coverage ratio, being positive signals,” RBI Governor Shaktikanta Das stated in the foreword to the report.

RBI governor Das has further added that stress test results further indicate an improvement in NPA ratio but its current level remains still high for comfort. He further suggested that there should be more emphasis on ‘diligent, prudent and sound risk management’ practices.

Hailing the Insolvency and Bankruptcy Code (IBC), Das has said that the reform has bridged an important institutional gap to strengthen the much-needed credit discipline. He expressed confidence in resolving specific cases which are lagging behind expected timelines. A time-bound resolution of impaired assets will go a long way in unclogging the credit pipeline thus improving the allocative efficiency in the economy, said Shaktikanta Das.


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