Banks’ share of bad loans continues to decline and falls to 6.9%: economic survey

India’s commercial banking system and financial sector have been able to withstand the economic aftermath of the pandemic, the economic survey 2021-2022 revealed. Despite the impact of the pandemic on earnings and revenues, the commercial banking sector as a whole has seen its share of bad debts shrink once again. The survey also pointed out that despite the waves of the pandemic affecting the country, the country’s banking system has been able to contain its non-performing assets (NPAs).

The gross non-performing assets (GNPA) ratio, which is calculated based on the total gross advances of all scheduled commercial banks (SCBs), has continued to decline since 2018-2019. The GNPA ratio fell to 6.9% at the end of September 2021, while the net non-performing assets (NNPA) ratio also decreased to 2.2% in the same period, from 7.5% at the end of September 2020 and 6% at the end of September 2020. end of fiscal year 2018, respectively, according to the Economic Survey.

The GNPA ratio for public sector banks also saw a decline to 8.6% at the end of September 2021. But at the same time, some stress can be seen through the SCB stressed advances ratio. The stressed advances ratio increased by 6 basis points (bps) to 8.5% at the end of September 2021 over the past year.

The ratio of capital to risk-weighted assets has also improved, the survey notes. “At the same time, the capital adequacy ratio has continued to improve since 2015-16. The ratio of capital to risk-weighted assets (CRAR) of SCBs decreased from 15.84% at the end of September 2020 to 16.54% at the end of September 2021 due to an improvement for banks in the public and private,” the report read.

The banking sector has also seen its balance sheets expand in terms of credit, with significant growth over the past year. Bank credit grew by 9.2% in December 2021 against 5.3% in April 2021.

Public sector banks continue to see their profitability ratios increase as their RoE and RoA remained positive for the period ending September 2021.

“The economic shock of the pandemic has been weathered well so far by the commercial banking system, although some lagged impact is still ongoing,” the survey showed.

However, at the same time, non-bank financial companies (NBFCs) continued to struggle. Credit growth remained slow for the sector, with total credit increasing from Rs 27.53 lakh crore in March 2021 to Rs 28.03 lakh crore in September 2021. The GNPA ratio also increased for NBFCs, standing at 6.55% at the end of September 2021 against 6.06. at the end of March 2021.

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(Edited by : Thomas Abraham)

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