Indian Banks' Gross Bad Loans Fall To A 10-Year Low Of 3.9%: Report
According to the Reserve Bank of India's latest financial stability report (FSR), scheduled commercial banks' net non-performing assets (NPA) ratio reached a 10-year low of 3.9 per cent in March 2023. The report stated that macro stress tests for credit risk indicate that banks are well-capitalised, and they would be able to meet the minimum capital requirements even in adverse stress scenarios. The gross and net NPA ratios have significantly decreased from 11.5 per cent and 6.1 per cent in March 2018 to 3.9 per cent and 1.0 per cent in March 2023, respectively.
The report also highlighted concerns regarding certain segments of Non-Banking Financial Intermediaries (NBFIs) that exhibit high leverage, posing systemic risks. The RBI noted that elevated levels of off-balance sheet financial leverage suggest that overall synthetic leverage may be reaching historical highs.
RBI Governor Shaktikanta Das mentioned in the report that the trajectories of global and Indian financial systems' growth have undergone changes since the previous issue of the FSR. The global financial system has faced significant strains due to banking turmoil in the United States and Europe since early March 2023. Conversely, India's financial sector has remained stable and resilient, with sustained growth in bank credit, low levels of non-performing assets, and sufficient capital and liquidity buffers.
The report further indicated that the latest Systemic Risk Survey conducted in May 2023 showed a decrease in risks across most categories contributing to domestic systemic risk. However, risks from global spillovers remained in the 'high' risk category, with more than half of the respondents expressing declining confidence in the stability of the global financial system. Major risks cited include the tightening of global financial conditions, global growth slowdown, and volatility in capital flows.
The FSR is a biannual publication that involves contributions from all financial sector regulators.
