GNPA Ratio of Banks Declines to 7.5% in Sept: RBI

India's scheduled commercial banks (SCBs) consolidated their gains achieved after the turnaround in 2018-19 during 2019-20 and first half of 2020-21, the Reserve Bank of India (RBI) said in a report.

As per the report on 'Trend and Progress of Banking in India 2019-20', the SCBs' gross non-performing assets (GNPA) ratio declined from 9.1 per cent at end-March 2019 to 8.2 per cent at end-March 2020 and further to 7.5 per cent at end-September 2020.

Besides, the report cited that capital to risk-weighted assets (CRAR) ratio of SCBs strengthened from 14.3 per cent at end-March 2019 to 14.7 per cent at end-March 2020 and further to 15.8 per cent at end-September 2020.

The strengthening of CRAR ratio was achieved partly by recapitalisation of public sector banks and capital raising from the market by both public and private sector banks, it said.

"Net profits of SCBs turned around in 2019-20 after losses in the previous two years; in H1:2020-21, their financial performance was shored up by the moratorium, standstill in asset classification and ploughing back of dividends."

Furthermore, the report pointed out that the Reserve Bank undertook an array of policy measures to mitigate the effects of Covid-19.

"Its (RBI's) regulatory ambit was reinforced by legislative amendments, giving it greater powers over co-operative banks, non-banking financial companies (NBFCs), and housing finance companies (HFCs); and it also undertook a series of initiatives to bolster its supervisory framework."

Additionally, it noted the recovery process has gained traction with the resolution of large accounts through the Insolvency and Bankruptcy Code (IBC); the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (SARFAESI) channel also aided the process of recovery.

In terms of Urban Co-operative Banks (UCBs), the report said balance sheet growth of UCBs moderated in 2019-20 on lower deposit accretion and muted expansion in credit; while their asset quality deteriorated, increased provisioning resulted in net losses.

The performance of state co-operative banks improved, both in terms of profitability and asset quality.

In addition, the report pointed out that the consolidated balance sheet of NBFCs decelerated in 2019-20 due to near stagnant growth in loans and advances although some improvement became visible in H1:2020-21; notwithstanding a marginal deterioration in asset quality.

"The NBFC sector remains resilient with strong capital buffers."