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Banks’ bad loans may rise again in next 9 months: RBI

December 28, 2019 05:35 AM

COURTESY TOI DEC 28
TIMES NEWS NETWORK

Mumbai:

The Reserve Bank of India (RBI) warned on Friday that bad debts in the economy may rise again in the next nine months, mainly due to a weak macro situation, higher slippages and low credit growth.


RBI’s financial stability report (FSR), published biannually in June and December, also pointed out that there were suspected cases of ratings shopping by mid-rated entities. It added that large corporates which are flush with cash and don’t need loans now are one of the reasons for the current muted rate of growth of credit offtake in the banking system.

The report also pointed out that banks’ credit growth remained subdued at 8.7% during the year ended September 2019, although the corresponding number for the private sector banks was 16.5%.

RBI also said Indian banks’ capital adequacy ratio improved significantly to 15.1% in September 2019 after recapitalisation of public sector banks by the government.


RBI: 4 banks had GNPA ratios higher than 20%

The provision coverage ratio (PCR) also rose to 61.5% from 60.5% a year earlier, implying increased resilience of the banking sector. “Macro-stress tests for credit risk show that under the baseline scenario, SCBs’ gross non-performing asset (GNPA) ratio may increase from 9.3% in September 2019 to 9.9% by September 2020, primarily due to change in macroeconomic scenario, marginal increase in slippages and the denominator effect of declining credit growth, RBI’s FSR noted.

It pointed out that staterun banks’ GNPA ratio may increase to 13.2% by September 2020 from 12.7% in September 2019, whereas for private banks it may climb to 4.2% from 3.9%, under the stress scenario. On the other hand, foreign banks’ GNPA ratio may increase to 3.1% from 2.9%. The central bank said that Indian banks’ net non-performing assets (NNPA) ratio declined in September 2019 to 3.7% due to increased provisioning.

The report also pointed out that bank-wise distribution of asset quality showed that while 24 banks had GNPA ratios of under 5%, four banks had GNPA ratios higher than 20% in September 2019. The asset quality of agriculture and services sectors, as measured by their GNPA ratios, deteriorated to 10.1% from around 8% a year earlier. However, for the industry sector, slippages fell sharply to 3.8% per cent from around 5%.

The report also showed that the share of large borrowers (between Rs 100 crore and Rs 5,000 crore) in banks’ total loan portfolios fell to 51.8% from 53% while their share in GNPAs improved to 79.3% from 82.2% earlier. It noted that the top 100 large borrowers accounted for 16.4% of banks’ gross advances and 16.3% of GNPAs

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