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GNPA ratio of banks declined to 7.5% in September, says RBI Trend and Progress report

During 2019-20 and first half of 2020-21, scheduled commercial banks (SCBs) consolidated the gains achieved after the turnaround in 2018-19, the RBI report said.

December 29, 2020 / 06:01 PM IST

Scheduled Commercial Banks’ (SCBs)gross non-performing assets (GNPA) ratio declined from 9.1 percent at end-March 2019 to 8.2 percent at end-March 2020 and further to 7.5 percent at end-September 2020, the Reserve Bank of India (RBI) said in its Report on Trend and Progress of Banking in India 2019-20 on December 29.

Further, the capital to risk weighted assets (CRAR) ratio of SCBs strengthened from 14.3 percent at end-March 2019 to 14.7 percent at end-March 2020 and further to 15.8 per cent at end-September 2020, partly aided by recapitalisation of public sector banks (PSBs) and capital raising from the market by both public and private sector banks, the RBI said.

Also, net profits of SCBs turned around in 2019-20 after losses in the previous two years. In H1, 2020-21, their financial performance was shored up by the moratorium, standstill in asset classification, and ploughing back of dividends, the RBI report said, adding, during 2019-20 and first half of 2020-21, SCBs consolidated the gains achieved after the turnaround in 2018-19.

The RBI’s Trend and Progress report presents the performance of the banking sector, including co-operative banks, and non-banking financial institutions during 2019-20 and 2020-21 so far. The report also offers some perspectives on the evolving outlook for India’s financial sector.

The RBI undertook an array of policy measures to mitigate the effects of the COVID-19 pandemic; its regulatory ambit was reinforced by legislative amendments, giving it greater powers over co-operative banks, NBFCs, and housing finance companies (HFCs), the report said, adding the regulator also undertook a series of initiatives to bolster its supervisory framework.

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The report noted that the recovery process gained traction with the resolution of large accounts through the Insolvency and Bankruptcy Code (IBC). Also, the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI) channel also aided the process of recovery, it said.

The balance sheet growth of Urban Co-operative Banks (UCBs) moderated in 2019-20 on lower deposit accretion and muted expansion in credit; while their asset quality deteriorated, increased provisioning resulted in net losses, according to the report.

While, the performance of state co-operative banks improved, both in terms of profitability and asset quality, the consolidated balance sheet of NBFCs decelerated in 2019-20 due to near stagnant growth in loans and advances, the RBI report said.

However, some improvement became visible in H1 of 2020-21, notwithstanding a marginal deterioration in asset quality, the NBFC sector remains resilient with strong capital buffers, the report said.
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