The gross non-performing assets ratio (GNPA) of banks fell to a six-year low of 5.9% in March 2022 from 7.4% in March 2021, according to the latest Financial Stability Report (FSR) released by the Reserve Bank of India (RBI) on June 30 .
Stress tests indicate that the commercial banks’ GNPA ratio could improve further, from 5.9% in March 2022 to 5.3% by March 2023, due to higher than bank credit growth. forecast and a downward trend in GNPA stock, among other factors, the report stated.
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This scenario, however, assumed that no further regulatory relief would occur until then and was calculated without considering the potential impact of stressed asset purchases by National Assets Reconstruction Company Ltd (NARCL).
The FSR indicates that if the macroeconomic environment deteriorates to a medium or severe stress scenario, the GNPA ratio could increase to 6.2% and 8.3%, respectively.
The latest report indicates that at the banking group level as well, the GNPA ratios could decline by March 2023 in the baseline scenario.
In the severe stress scenario, however, public sector bank GNPA ratios could drop from 7.6% in March 2022 to 10.5% a year later, while they would drop from 3.7% to 5, 7% for private sector banks and 2.8% to 4.0%. % for foreign banks over the same period.
The FSR is published semi-annually.
First post: STI