Banks’ GNPA ratio fell to 3

Banks’ GNPA ratio fell to 3.2% in Sept, shows RBI report

Indian banks’ asset quality continued improving in FY24, with gross non-performing asset ratio (GNPA) moderating to 3.2% as of September end, from a decadal low of 3.9% in March, according to the Reserve Bank of India’s (RBI) trends and progress in banking latest report said on Wednesday. A mix of write-offs, upgradations and recoveries contributed to a reduction in NPAs, it said.

In absolute terms, public sector banks’ GNPAs reduced to Rupees 4.28 trillion as of March end from Rupees 5.42 trillion the previous fiscal, while private banks’ GNPAs moderated to Rupees 1.25 trillion as of March 31 from Rupees 1.80 trillion in FY22.

The RBI said in retrospect, the Covid-19 pandemic’s impact was less than initially feared for larger and industrial sector firms and the impact across firms and sectors was transient.

Further, the regulator said that the share of unsecured advances in banks’ total credit has been increasing since the end of March 2015, reaching 25.5% by March 2023. More than 50% of loans by foreign banks are unsecured, while the share is lower at 27.3% and 22.6% for private lenders and public sector banks, respectively.

“The Reserve Bank’s November 2023 measures to increase risk weights on select categories of consumer credit exposure need to be seen in this evolving milieu,” it said.

According to a report by rating agency ICRA, banks’ GNPA and net NPA ratio will further moderate to 2.8%-3.1% and 0.7%, respectively, as of March 31, 2024. GNPA and NNPA ratios will fall to 2.1%-2.5% and 0.5%-0.6%, respectively, by March 2025, it said.

Loan, deposit growth

The RBI’s report said that banks’ credit grew 16.2% year-on-year (YoY) during November, with public sector banks’ share in incremental credit increasing to 46.5%. The aggregate deposits, meanwhile, picked up pace, led by term deposits of private lenders–benefitting from higher term deposit rates and moderation of surplus liquidity.

Interest rates on savings bank deposits, which account for around 31.4% of total deposits, remained largely unchanged, which helped banks to post higher net interest margins (NIMs), the RBI said.

As deposit growth lagged credit growth, banks’ credit-deposit ratio (CD) increased from 74.9% at the end of November 2022 to 77% during November 2023.

On an overall level, the share of state-owned banks in the consolidated balance sheet of banks declined from 58.6% as of March 2022 to 57.6% as of March 2023. Private banks gained a share from 34% to 34.7% during the same period. As of March 31, public sector banks accounted for 61.4% of total deposits and 57.9% of overall advances.