NPAs of Scheduled Commercial Banks increased 9.1% between Mar and Sept

The Dollar Business Bureau 

In the backdrop of deteriorating microeconomic conditions, the Indian banking sector continues to remain under serious stress, with the non-performing assets increasing to as much as 9.1% in September from 7.8% in March, the RBI said in a statement.

According to the Financial Stability Report (FSR) released by the RBI, the gross non-performing advances (GNPAs) ratio of Scheduled Commercial Banks (SCBs) increased to 9.1% from 7.8% between March and September 2016, pushing the overall stressed advances ratio to 12.3% from 11.5%.

The report said that if the microeconomic situation does not improve in the near future, the GNPA may grow further.

There will be an extra pressure on the banks given high levels of impairment, and as the banks clean up their balance sheets, their capital position may remain insufficient to enhance higher credit growth.

Meanwhile, the asset quality of large borrowers also deteriorated considerably as the shares of special mention accounts (SMA)-2 grew across bank-groups during the period.

According to the stress test, the gross NPA ratio could raise from 9.1% in September 2016 to 9.8% by March 2017 and further to 10.1% by March 2018.

Under baseline scenario, PSBs’ GNPA ratio may increase from 11.8 % in September 2016 to 12.5% in March 2017 and then to 12.9% in March 2018. This could also increase further under a severe stress scenario.

The study highlighted that the PSBs may continue to account for the highest GNPA ratio among the bank groups.