Gross NPA of Bank fell sharp by 2.6% to 12-year low in September: RBI
The RBI noted that write-offs continue to play a significant role in reducing NPAs, as shown in the disaggregation of NPA movements.
Gross NPA of Bank fell sharp by 2.6% to 12-year low in September: RBI
As per the latest Reserve Bank of India's Financial Stability Report (FSR), improvements in the asset quality of scheduled commercial banks (SCBs) are noted. The banks' Gross Non-Performing Assets (GNPA) ratio dropped to a 12-year low of 2.6% in September 2024, reflecting a sustained decline in bad loans.
In addition to the GNPA improvement, the Net Non-Performing Assets (NNPA) ratio remained stable at approximately 0.6%. However, the half-yearly slippage ratio, measuring new accretions to NPAs, slightly increased to 0.7%. Despite this, the report said the overall asset quality remains robust.
A key indicator of banks' resilience is their Provisioning Coverage Ratio (PCR), which increased to 77% by September 2024. This improvement is largely attributed to proactive provisioning, especially by public sector banks (PSBs). The write-off to GNPA ratio for foreign banks (FBs) rose during the period, while that for PSBs and private sector banks (PVBs) saw a minor decline.
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The RBI noted that write-offs continue to play a significant role in reducing NPAs, as shown in the disaggregation of NPA movements. The positive trend in asset quality was widespread across different sectors. Within personal loans, the asset quality remained stable, although credit card receivables saw a marginal uptick in delinquencies.
On the industrial side, sustained improvements were seen across major sub-sectors. The RBI’s banking stability indicator (BSI), which assesses the overall soundness of the banking sector, also showed improvement. The BSI's positive trend is driven by stronger capital buffers and lower NPAs.
Despite improved profitability and returns on assets (RoA) and equity (RoE), the net interest margin (NIM) saw a slight decline due to a shift in deposits to higher interest rate brackets. The banking system's resilience is supported by strong capital ratios.
The Common Equity Tier 1 (CET1) ratio, a measure of regulatory capital, stood at 14.0%—well above the 8% regulatory minimum. While liquidity measures such as the liquidity coverage ratio (LCR) showed a decline, the overall liquidity buffer remains above regulatory minimums.
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