The gross non-performing assets (GNPAs) of scheduled commercial banks (SCBs) declined to 4.5 percent in December 2022 from 6.5 percent a year ago, the Reserve Bank of India (RBI) bulletin said on April 21.
According to RBI rules, a loan is classified as NPA if there is no repayment of principal or interest for a period of 90 days. Banks have to set aside money, called provisions, against such loans. This impacts their profitability.
The bulletin highlighted that the asset quality of banks improved across all the major sectors over the same period.
RBI Bulletin is a monthly publication that offers insights into the state of the domestic economy and financial sector.
The net NPAs of the banking system were 1.2 percent in December 2022, the bulletin showed.
Moneycontrol earlier reported that the asset quality of Indian banks is expected to improve, aided by a fall in fresh slippages.
Also read: Bank asset quality to improve on expected fall in fresh slippages, say analysts
As per a CareEdge Ratings report, the gross NPAs of scheduled commercial banks fell 19.7 percent to Rs 6.1 lakh crore as of December 31, 2022, from Rs 7.5 lakh crore in the year-ago period.
Banks' write-offs grew by 25.2 percent on-year to Rs 29,000 crore from Rs 23,000 crore in the third quarter of FY22 and fresh slippages declined by 12 percent.
A loan is written off when there is no hope of recovery from the borrower. Banks need to make full provisions for written-off assets.
Most banks reported an improvement in bad loan numbers in the third quarter.
State Bank of India reported 3.14 percent gross NPAs and 0.77 percent net NPAs, lower than 4.5 percent gross NPAs and 1.34 percent net NPAs a year earlier.
Bank of Baroda reported 4.53 percent gross NPAs and 0.99 percent NPAs, sharply lower than last year’s figures.
The country's largest private sector lender, HDFC Bank, reported a marginal improvement in its asset quality in the December 2022 quarter.
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