Bad loans of banks may rise to 9.9% by September 2020: RBI

The asset quality of Indian commercial banks may worsen with rise in slippages and lack of credit growth next year, the Reserve Bank of India (RBI) said in the Financial Stability Report released on December 27.

Gross NPA ratio may increase to 9.9 percent by September 2020, from 9.3 percent a year ago, the report said.

"This is primarily due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth," the central bank noted.

Bank-wise distribution of asset quality showed that while 24 banks had  gross NPA ratios under 5 percent, four banks had gross NPA ratios higher than 20 percent in September 2019, as per the report.

Under the baseline scenario, the gross NPA ratios of public, private and foreign banks are likely to rise to 13.2 percent, 4.2 percent and 3.1 percent respectively, by September 2020.

RBI added that for banks with high gross NPA ratios, availability of Tier-I capital appears to be limited.

As on September 30, credit growth stood at 8.9 percent, while private lenders clocked higher growth rate of 16.5 percent in the same period.

Indian lenders’ provisioning coverage ratio rose from 60.5 percent in March 2019, to 61.5 percent in September quarter, implying better resilience of the banking sector, the central bank said.