RBI's FSR sees rise in bank NPAs to 14.8%

Hyderabad: Indian banking sector will see rise in bad loans this year, according to RBI's Financial Stability Report (FSR) released on January 11. According to the report, total gross non-performing assets (GNPAs) may go up to 14.8 per cent under a severe stress scenario by September 2021.

The GNPAs were 7.5 per cent last financial year. Under a baseline scenario, the GNPAs may climb to 13.5 per cent by September, the report said. The RBI said these numbers were arrived at based on the macro stress tests incorporating the first advance estimates of gross domestic product (GDP) for 2020-21 released on January 7, 2021.

"This highlights the need for proactive building up of adequate capital to withstand possible asset quality deterioration," the RBI said.

According to the report, the capital to risk-weighted assets ratio (CRAR) of scheduled commercial banks (SCBs) improved to 15.8 per cent in September 2020 from 14.7 per cent in March 2020, while their GNPA ratio declined to 7.5 percent from 8.4 percent.

Similarly, the provision coverage ratio (PCR) improved to 72.4 percent from 66.2 percent over this period, the report said. Performance parameters of banks had improved significantly, aided by regulatory dispensations extended in response to the Covid-19 pandemic, the report said. Bank credit growth remained subdued, with the moderation being broad-based across bank groups.

Noting that in the initial phase of the coronavirus outbreak, policy actions were geared towards restoring normal functioning and mitigating stress, the report said the focus was now on supporting the recovery and preserving the solvency of businesses and households.