Banks' NPAs cause for concern, says RBI

Banks' NPAs cause for concern, says RBI

Likewise, it said, liquidity management is likely to become critical going forward as monetary policy stance responds to macroeconomic developments, RBI said in its Report on Trend & Progress of Banking in India 2009-10 released here.

“Management of NPAs by banks remains an area of concern, particularly, due to the likelihood of deterioration in the quality of restructured advances,” RBI said.

It also warned of signs of financial stress to remain which will be an important concern for the Indian banking sector in the medium-to-short-term.

Meanwhile, RBI said growth in the consolidated balancesheet of scheduled commercial banks (SCBs) has decelerated in 2009-10 owing to contraction in assets of foreign banks and slow down in public sector banks including nationalised ones and SBI Group as a whole. However, the only exception was new private sector banks, which had underperformed their old counterparts in 2008-09, recorded accelerated growth in fiscal 2010, This contraction in the assets of foreign banks was a break in the trend observed in the recent past, when assets of foreign banks had posted an annual growth consistently exceeding 20 per cent, the report noted. 

Consequent to the contraction in the balancesheet of the group of foreign banks, the share of foreign bank in the total assets of the banking sector witnessed a decline in 2009-10 from 8.5 per cent to 7.2 per cent. 

There was a decline in the share of new private sector banks in total banking sector also.  
However, despite decelerated growth of assets of public sector banks, their relative share in the total assets of the banking sector posted an increase in 2009-10 to 73.7 per cent from the earlier 71.9 per cent. 

The slow down in the growth of balance sheets emanated largely from deposits, the major component of liabilities of SCBs. Bank deposits — which constituted 78 per cent of the total liabilities of SCBs — registered a decelerated growth for the third consecutive year from 2007-08 and one of the factors responsible for decline in deposits growth in fiscal 2010 was the prevalence of low interest rates for most part of the year.

DH Newsletter Privacy Policy Get top news in your inbox daily
GET IT
Comments (+)