Health of banks worsened in past six months: RBI

With stressed assets continuing to rise and expected to get worse, the Reserve Bank has cautioned that risks to the banking system have increased over the last six months, but added that there are no systemic risks at the moment.

"The banking stability indicator shows that risks to the banking sector have increased since June 2013," the RBI said in its half-yearly Financial Stability Report released today.The indicator combines the impact on all major risk dimensions, said the RBI, which has carried out multiple tests before coming to this conclusion.

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"The strain on asset quality continues to be a majorconcern," the report said. With the present conditions continuing, the gross NPAs inthe system will rise to 4.6 percent by September 2014 from 4.2 percent in September 2013 or about Rs 2,29,000 crore from Rs 1,67, 000 crore a year earlier, it said.

The amount of recast loans touched an all-time high of 4 trillion or 10.2 per cent of the overall advances as of September 2013, the report added. However, the RBI expects some positives in the second half of the next fiscal and is estimating gross NPAs to improve to 4.4 percent by March 2015. In case the economic conditions deteriorate, the same number will be 7 percent by March 2015, the RBI warned.

The state-run banks will be worst-affected, the report said, pegging the GNPAs for public sector banks at 4.9 percent by March 2015. It projected the GNPAs for private banks at 2.7 per cent in the same period. If the restructured assets are added, the total stressed advances ratio will rise to 10.2 percent as of September 2013 from the 9.2 percent in March 2013, the RBI said.