Even as the country treads towards a higher growth trajectory, banks continue their struggle to rein in their stressed assets and are likely to struggle for the next six months as well, according to the Reserve Bank of India.
“The macro stress test of credit risk suggests that under the baseline scenario, the gross non performing assets (GNPA) ratio may increase to 4.8 per cent by September 2015 (same as recorded in December 2014) from 4.6 per cent as of March 2015, which could subsequently improve to 4.7 per cent by March 2016,” RBI said in its Financial Stability Report.
However, if the macroeconomic conditions deteriorate, the GNPA ratio may increase further and it could rise to around 5.9 per cent by March 2016 under a severe stress scenario. Under such a scenario, the system level capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) could decline to 11.5 per cent by March 2016 from 12.9 per cent as of March 2015, the report added.
As per the report, the GNPAs of SCBs as percentage of gross advances increased to 4.6 per cent from 4.5 per cent between September 2014 and March 2015. The restructured standard advances during the period also increased, pushing up the SCBs’ stressed advances to 11.1 per cent of the total advances from 10.7 per cent.
Public sector banks (PSBs) recorded the highest level of stressed assets at 13.5 per cent of total advances as of March 2015, compared with 4.6 per cent in the case of private banks (PVBs). The net non-performing advances (NNPAs) as a percentage of the total net advances for all SCBs remained unchanged at 2.5 per cent during September 2014 and March 2015. At bank group level, NNPA ratio of PSBs increased from 3.1 per cent to 3.2 per cent and in the case of PVBs, it increased from 0.8 per cent to 0.9 per cent.
This is the 11th issue of the FSR which carries out the usual health check of the Indian financial system. The report has also flagged off the rising threat of NPAs from the distribution companies due to their deteriorating financial health.
Banks free to borrow from abroad
Easing norms for accessing foreign funds, RBI on Thursday allowed banks to borrow from international financial institutions for general banking business without seeking its permission. “With a view to providing greater flexibility in seeking access to overseas funds, it has now been decided to permit... banks to borrow from international/multilateral financial institutions without approaching Reserve Bank for a case by case approval,” the RBI said.