The Reserve Bank of India (RBI) released two important reports last week -- the Financial Stability Report and banking sector’s Trends and Progress 2018-19.
These reports showed that, while the sector remains resilient in the face of current slowdown, its health will improve on a turnaround in the macroeconomic environment.
However, the RBI has also said that bad loans may rise next year, after showing some improvement in 2019.
The asset quality of Indian commercial banks may worsen with rise in slippages and lack of credit growth next year, the RBI said in the Financial Stability Report released on December 27.
The gross non-performing asset (NPA) ratio may increase to 9.9 percent by September 2020, from 9.3 percent a year ago, the report said.
There has been an improvement in the asset quality of banks after a gap of seven years, the RBI said in a report. The central bank also highlighted that the banking sector's health hinges on turnaround in growth.
The reserve bank is looking into the scope and role of forensic audits for quicker detection of frauds in the banking system, the central bank said in the Financial Stability Report on December 27.
The regulator said that banks have been asked to increase their focus on fraud response plan. To enable this, the RBI will prescribe stricter timelines and 'clear cut' guidance for reporting of frauds.
The flow of credit from the financial sector to real estate companies continued to rise since June 2016, even as their financial health came under stress during the period, the RBI said in a report. Loans given to real estate companies rose to Rs 2.01 lakh crore in June 2019, up from Rs 1.05 lakh crore in June 2016, the RBI said in the Financial Stability Report released on December 27.