Bank lending at 11-year high, bad debts lowest in 7 yrs: RBI
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The Reserve Bank of India (RBI) said in its latest report has said the Indian financial sector has “remained resilient” and the scheduled commercial banks have witnessed a jump in lending while the bad debt in the banking system has continued to decline to date in the current fiscal.
In the financial stability report, the banking regulator said, “SCBs’ credit growth (y-o-y), which started picking up during H2:2021-22, sustained its momentum and gathered pace to touch a decadal high of 17.4% as on December 16, 2022, a level last observed during 2011. The increase has been broad-based across geography, economic sectors, population groups, organisations, type of accounts and bank groups.”
On bad debt in the banking sector, the report said, “The gross NPA ratio of the scheduled commercial banks continued to decline and stood at a seven-year low of 5% in September 2022. The net non-performing assets (NNPA) ratio stood at a ten-year low of 1.3%, wherein private sector banks’ (PVBs) NNPA ratio was below 1%.”
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“The quarterly slippage ratio, which had been rising since December 2021, cooled off during Q2:2022-23, with considerable improvement recorded by public sector banks. The provisioning coverage ratio (PCR) has been increasing steadily since March 2021, and reached 71.5% in September 2022. The PCRs of PVBs and foreign banks exceeded 75%. Meanwhile, the write-offs to GNPA ratio increased during H1:2022-23 on an annualised basis, after declining for two consecutive years,” the report said.
The RBI said the Indian financial sector has remained resilient building on the consolidation of the banking sector’s balance sheet, the ongoing reduction in bad loans and the buffering of risk absorbing capacity. “Macro stress tests indicate that all banks would meet the regulatory minimum capital requirements even in a severe stress scenario. Stress tests indicate that some non-banking financial companies may be vulnerable to liquidity shocks. Contagion risks and consequent additional solvency losses remain limited,” said the financial stability report.