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NPAs on downhill path since March peak, says RBI
News:
- The RBI, in its submissions to the Standing Committee on Finance, revealed that both gross and net non-performing assets (NPAs) of scheduled commercial banks have reduced in the two consecutive quarters ending September 30, 2018 since their peak in March 2018.
Important Facts:
- Other major findings:
- The annualised slippage ratio (i.e. the percentage of fresh NPAs as percentage of standard advances at the beginning of the quarter) has also witnessed a declining trend over the past two quarters, which also reflects credit discipline.
- Slippage ratio: The percentage of fresh NPAs as percentage of standard advances at the beginning of the quarter.
- The profitability of banks continues to be impacted on account of the decline in earnings from loan assets.
- The higher provisions that are required to be maintained to reflect the deterioration in asset quality, will eventually crystallise as actual losses.
- However, the decline in NPAs, particularly fresh slippages, will reflect in the improved profitability going forward.
- The RBI said that although weak bank balance sheets had created significant headwinds for credit growth, this had still been picking up on a year-on-year basis.
- Credit growth for scheduled commercial banks stood at 5.82% in September 2017 compared with the same month in the previous year, which grew to 10.7% in September 2018.
