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NPAs: Bad assets of banks decline multi-year low of 0.8% in September 2023

NPAs: Bad assets of banks decline multi-year low of 0.8% in September 2023

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Virendra Pandit

 

New Delhi: The Reserve Bank of India (RBI) on Thursday said the net non-performing assets (NPAs) ratio of banks declined to a multi-year low of 0.8 percent at the end of September 2023 and that the country’s domestic financial system remains resilient.

“The resilience of the non-banking financial companies (NBFCs) sector improved with CRAR at 27.6 percent, GNPA ratio at 4.6 percent and return on assets (ROA) at 2.9 percent, respectively, in September 2023,” said the central bank’s Financial Stability Report (FSR).

The gross non-performing assets (GNPA) ratio of banks also declined to a multi-year low of 3.2 percent, it said, according to the media reports.

The RBI’s report reflects the collective assessment of the Sub-Committee of the Financial Stability and Development Council (FSDC) on risks to financial stability and the resilience of the Indian financial system.

The capital-to-risk-weighted assets ratio (CRAR) and the common equity tier 1 (CET1) ratio of scheduled commercial banks (SCBS) stood at 16.8 percent and 13.7 percent, respectively, in September 2023.

“Macro stress tests for credit risk reveal that SCBs would be able to comply with minimum capital requirements, with the system-level CRAR in September 2024 projected at 14.8 percent, 13.5 percent, and 12.2 percent, respectively, under baseline, medium, and severe stress scenarios,” the report said.

Referring to the present state of the Indian economy, it said the domestic financial system remained resilient, supported by strong macroeconomic fundamentals, healthy balance sheets of financial institutions, moderating inflation, improving external sector position, and continuing fiscal consolidation.

However, the global economy faces multiple challenges, including prospects of slowing growth, large public debt, increasing economic fragmentation, and prolonged geopolitical conflicts.

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