Gross NPAs may rise to 9.9% by next Sept., says RBI report

Reviving twin engines of consumption and investment remains the key challenge, according to Governor Shaktikanta Das

The gross non-performing asset (GNPA) ratio of banks may increase to 9.9% by September 2020 from 9.3% in September 2019, according to an RBI report.

“Stress tests indicate that under the baseline scenario, the GNPA ratios of banks may increase to 9.9% by September 2020 due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth,” the RBI said in its Financial Stability Report. The baseline scenario assumed the continuation of the current economic situation in the future.

The report said state-run banks’ GNPA ratios may increase to 13.2% by September 2020 from 12.7% in September 2019, whereas for private banks it may climb to 4.2% from 3.9%, under the stress scenario. Foreign banks’ gross bad loans may increase to 3.1% from 2.9% in September 2019.

The report said banks’ net non-performing assets (NNPA) ratio declined in September 2019 to 3.7%.

The aggregate provision coverage ratio (PCR) of all banks rose to 61.5% in September 2019 from 60.5% in March 2019. “Following the recapitalisation of state-run banks by the government, [all] banks’ capital to risk-weighted assets ratio (CRAR) improved to 15.1% in September 2019 from 14.3% in March 2019,” the report said.

The state-run banks’ CRAR improved to 13.5% from 12.2% during the same period. Bank-wise distribution of asset quality showed while 24 banks had GNPA ratios of under 5%, four banks had GNPA ratios higher than 20% in September 2019.

Agriculture, services

The asset quality of agriculture and services sectors, as measured by their GNPA ratios, deteriorated to 10.1% in September 2019 from about 8% in March 2019. For industry, slippages during the period declined to 3.79% from about 5% in March 2019.

The report showed that the share of large borrowers in banks’ total loan portfolios and their share in GNPAs was at 51.8% and 79.3%, respectively, in September 2019, lower compared to the 53% and 82.2%, respectively in March 2019. The top 100 large borrowers accounted for 16.4% of banks’ gross advances and 16.3% of GNPAs.

Amid rising macroeconomic worries reflected in falling growth numbers across spectrum, RBI Governor Shaktikanta Das flagged corporate governance concerns across India Inc., including banks, to lift the efficiency of the economy to its full potential. He also said reviving the twin engines of consumption and investment remains the key challenge even while remaining vigilant about spillovers from global financial markets.

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