Economic Survey 2022: Banking system past the pandemic but some lagged impact remains in the pipeline

The Indian banking system appears to have weathered the pandemic shock well even if there is some lagged impact in the pipeline, the 2022 Economic Survey said on 31 January.

Overall, the stressed advances ratio of scheduled commercial banks (SCBs) increased from 7.9 per cent at end-September 2020 to 8.5 per cent at end-September 2021, the government's annual pre-budget survey released on January 31 said.

"Various COVID-19 related dispensations/moratoriums provided with respect to asset quality contributed towards increase in restructured assets and, as a result, stressed advances ratio for the banking system increased at end-September 2021," the survey said.

Gross non-performing asset (NPA) ratio of public sector banks (PSBs) decreased from 9.4 per cent at end-September 2020 to 8.6 per cent at end-September 2021, the survey said.

The stressed advances ratio of PSBs increased marginally from 10.0 per cent to 10.1 per cent during the same period on account of a rise in restructured advances, the survey added.

However, the capital adequacy ratio has continued to improve since 2015-16. Capital to risk weighted asset ratio (CRAR) of SCBs increased from 15.84 per cent at end-September 2020 to 16.54 per cent at end-September 2021 on account of improvement for both public and private sector banks, the survey said.

"More significantly, the banking system is well capitalised and the overhang of NPAs seems to have structurally declined even allowing for some lagged impact of the pandemic," it added.

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