New Delhi [India], December 27 : The gross non-performing assets (GNPA) ratio of scheduled commercial banks (SCBs) fell to a decadal low of 3.9 per cent at end-March 2023 and further to 3.2 per cent at end-September 2023, the Reserve Bank of India said on Wednesday in a report titled 'Report on Trend and Progress of Banking in India 2022-23'.
The improvement in asset quality of banks, measured by their GNPA ratios, that began in 2018-19 continued during 2022-23.
During 2022-23, around 45 per cent of reduction in GNPAs of SCBs was contributed by recoveries and upgradations, the RBI said in the report.
The slippage ratio which measures new accretions to NPAs as a share of standard advances at the beginning of the year moderated during 2022-23 and further in the first half of 2023-24.
"The Indian banking system and non-banking financial companies (NBFCs) remain sound and resilient, backed by high capital ratios, improved asset quality and robust earnings growth. This is supporting a double digit credit growth and domestic economic activity," RBI said.
It suggested that to sustain this improvement, it would require further strengthening of governance and risk management practices and the building up of additional buffers.
According to RBI, the GNPA ratio remained the highest for the agricultural sector and the lowest for retail loans as of September 2023.
The asset quality of the industrial sector improved further, with its GNPA ratio at 4.2 per cent at end of September 2023. The variation in asset quality between bank groups has narrowed over the years.
The improvement in asset quality during 2022-23 was broad-based across industries, with notable gains in mining and quarrying, construction, engineering and basic metals.
The gems and jewellery industry has the highest GNPA ratio due to legacy issues.
Further, the RBI report said the consolidated balance sheet of SCBs (excluding regional rural banks) grew by 12.2 per cent in 2022-23, the highest in nine years.
The main driver of this growth on the asset side was bank credit, which recorded its fastest pace of expansion in more than a decade, the report said.
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