The gross non-performing assets (GNPA) ratio of banks continued its downtrend and fell to a 10-year low of 3.9 per cent in March 2023, the Reserve Bank of India (RBI) said in its Financial Stability Report released on June 28.
The net non-performing assets (NNPA) ratio declined to 1.0 percent, the RBI report said. Further, the macro stress tests for credit risk reveal that SCBs would be able to comply with the minimum capital requirements even under severe stress scenarios, the report said.
Stress test results reveal that SCBs are well capitalised and capable of absorbing macroeconomic shocks over a one-year horizon even in the absence of any further capital infusion, the report said.
"As per the stress test results, the GNPA ratio of all SCBs may improve to 3.6 per cent by March 2024," the report said.
The system-level capital to risk-weighted assets ratio (CRAR) in March 2024, under baseline, medium and severe stress scenarios, is projected at 16.1 percent, 14.7 percent and 13.3 percent, respectively, the report said.
The FSR report is a half-yearly RBI publication that offers insights into the health of the Indian banking system.
As per the report, the improvement in SCBs’ asset quality has been broad based, with a steady decline in the stressed advances ratio across all major sectors.
Also, while there has been overall improvement in asset quality in respect of personal loans, impairments in the credit card receivables segment have risen marginally, the RBI siad. Within the industrial sector, asset quality continued to improve across sub-sectors, the report said.
According to the stress tests, the common equity Tier I (CET1) capital ratio of the select 46 SCBs may decline from 13.7 per cent in March 2023 to 13.1 per cent by March 2024 under the baseline scenario, the report said.
More importantly, even in a severely stressed macroeconomic environment, the aggregate CET1 capital ratio would deplete by 290 basis points only, which would not breach the minimum regulatory norms, the report added.
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